Cement makers want refund of Tk 7.5b AIT

NEWS DESK

Local cement manufacturers have urged the government to refund an accumulated advance income tax (AIT) worth Tk 7.5 billion to offer a "breathing space" for the cash-strapped companies.

The Bangladesh Cement Manufacturers Association or BCMA made the appeal in a letter sent to the chairman of the National Board of Revenue on Wednesday.

"We are earnestly requesting you to kindly issue necessary orders to immediately refund the accumulated advance income tax," said the BCMA letter.

The lobby group said the refund will provide some cash flow to the companies facing acute shortage of fund amid the ongoing lockdown aimed at flattening the curve of the deadly virus.

"All the cement companies are incurring losses this year and the situation is likely to worsen in the coming months," said the letter, signed by BCMA president Alamgir Kabir.

The association said presently, they are passing a tough time following hikes in prices of raw materials and rise in production cost.

"Unfortunately, the sector has been suffering for a number of reasons in the past few years. The prices of raw materials have increased due to the devaluation of the taka against USD and FOB prices," said the BCMA.

Other costs of production such as utility bills, manpower and transport have increased sharply, the association said.

"Finally, the cost of finance has seen a big increase due to sharp increase in interest rates and large working capital needed to finance accounts receivables that have risen sharply due to intense competition," the grouping said.

The BCMA said the sector depends entirely on the imports of raw materials and currently, advance income tax is being deducted at source at the rate of 3.0 per cent on the importation.

At the import stage, the assessment value of raw materials is generally higher by around 25 per cent, thus the effective advance income tax comes to around 4.0 per cent, the BCMA said.

The association estimated if source tax on retail sales and tax at source on exports are considered, the effective advance tax rate would be around 9.0 per cent.

Also, with effect from this year, the advance tax of 3.0 per cent paid on import is now treated as minimum tax. In addition, the other taxes deducted at source are also treated as minimum tax.

"In this situation, the advance tax of around 9.0 per cent cannot be adjusted against profits," said the association of cement manufacturers.

The advance tax is now becoming minimum tax for cement companies since the companies are registering negligible or negative profit before tax, according to the BCMA.

The association said the novel coronavirus has also crippled the industry.

Since, the cement sector is labour-intensive, it is continuing to support its workforce by paying salaries of over Tk 1.0 billion every month, which is increasing losses.

"The eroded margins over the years have led to a situation where all the cement players have huge unadjusted advance income tax in excess of Tk 7.5 billion or more."

If interest cost at the rate of 10 per cent is considered, every year, the industry is losing around Tk 750 million in interest costs, the association said.

The association said such refund has been stuck for years, despite the applications for refunds being made and are not refunded in cash.

"The proposed measures will give a lifeline to the cement industry, where many companies are facing closure since they are making losses," the association said.