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Jul 07, 2023

Turnover tax on beverages reduced to 3%

The government has reduced the turnover tax on the carbonated beverages industry to 3%, which was set at 5% for fiscal 2023-24, to give breathing space for small and new companies. The decision will

The government has reduced the turnover tax on the carbonated beverages industry to 3%, which was set at 5% for fiscal 2023-24, to give breathing space for small and new companies.

The decision will come into effect immediately, according to a Statutory Regulatory Order (SRO) issued by the National Board of Revenue (NBR) on Tuesday.

In the FY24 budget, the government set the turnover tax for the carbonated beverages industry at 5% -- an over eight-fold hike from 0.60% in the previous fiscal -- to generate more revenue from this sector.

At that time, NBR officials mentioned that the advance income tax paid by the beverages industry for raw material imports would be counted as the minimum tax.

However, experts and sector leaders feared that the turnover tax hike would burden small and new companies that are not profitable yet. Besides, new companies may not enter this sector due to such a high turnover tax, they added.

Wishing anonymity, a chief financial officer of a leading beverages company, told The Business Standard that big companies are not paying turnover tax as they are making profits and submitting their returns under corporate tax rates applicable to them.

But, the turnover tax hike move may create a scope for the companies to increase products' prices further, the officer feared.

Earlier, PRAN-RFL Group Director Kamruzzaman Kamal told TBS, "Being one of the large companies in this sector, we are paying regular tax, not a turnover tax."

He also mentioned that most of the large beverage companies are paying regular taxes instead of turnover tax.

Kamruzzaman urged the government to revise the raw material duty structure as every beverages company is facing challenges due to raw material price hikes stemming from the high dollar exchange rate and energy prices.

According to the Bangladesh Beverage Manufacturers' Association, this sector has an annual turnover of about Tk8,000 crore and some major market players have already invested about Tk10,000 crore. Of them, Akij Food and Beverage invested more than Tk800 crore.

Coca-Cola franchise International Beverage and Abdul Monem Ltd invested Tk716 crore and Tk290 crore respectively for manufacturing beverages.

Transcom Beverage invested Tk756 crore, Globe Soft Drinks Tk565 crore, AST Beverage Tk384 crore, Pran Beverage Tk485 crore, Partex Beverage Tk229 crore, Sajeeb Corporation Tk140 crore and Meghna Group Tk336 crore.

The country's beverage sector has employed nearly 3.5 lakh people at production and distribution levels.

NBR / Turnover tax / Carbonated beverage