A large number of traders downed their shutters in the city yesterday demanding a cut in package VAT which they say is too high.

The protest came as the government doubled the rate of package or fixed VAT for the fiscal year 2016-17.

The rate of package VAT for shops in Dhaka North, South and Chittagong city corporations has been hiked to Tk 28,000 a year for FY 2016-17 from Tk 14,000 in the previous FY.

“It would be very difficult for small shops to pay such a big amount,” Abdus Salam, president of Byabosayee Oikya Forum, a platform of small and medium traders, told The Daily Star.

Shop owners and sales persons sit idle and pass time playing chess at a market in Chawk Bazar intersection in Lalbagh of Old Dhaka. Photo: Prabir Das/Palash Khan

The Forum had called the strike earlier this week. It urged Finance Minister AMA Muhith to address the issue by November 20. 

Yesterday, shop operators staged demonstrations in various parts of the city, particularly in Old Dhaka. Wholesales and retailers kept their shops closed since morning.

They observed a day-long strike and brought out a procession yesterday demanding their harassment by VAT officials be stopped and “package VAT” system be restored. Photo: Prabir Das/Palash Khan

Besides, most of the outlets at Bangabandhu National Stadium Market, Aziz Cooperative Super Market, in Farmgate, Mohakhali, Fakirapool, Mouchak intersection and Bangla Motor areas, on Kazi Nazrul Islam Avenue and Green Road were seen closed.

However, shops on Shyamoli Ring Road, Sathmasjid Road in Dhanmondi, at Bashundhara City and New Market were open.

In a press release, Dhaka City Shop Owners Association yesterday said shops were closed from morning till evening.

Forum leader Salam said shop operators would not object to a change if the government raised the rate of package VAT by 20 percent on that of FY 2015-16. 

Asked why they were reluctant to pay VAT which is paid by consumers, he said buyers do not want to pay the tax.

“It requires raising awareness,” Salam added.

The package VAT for shops in other city corporation areas has been doubled to Tk 20,000 for the current FY. The National Board of Revenue (NBR) also hiked the fixed amount of VAT for shops in municipalities.

Traders started protesting the hike in package VAT since the government placed the national budget in parliament on June 2.

At present, the revenue authority collects 3 percent trade VAT from shops having an annual turnover of less than Tk 80 lakh, a senior revenue official said on condition of anonymity.

But traders usually do not submit VAT returns to the NBR to avoid showing their annual turnover, he added.

The government scrapped the package VAT system in the new law which would be in force from July 1 next year. This is because an insignificant amount of revenue is collected from package VAT, he said citing a previous study of NBR.

The administrative costs for collecting package VAT was around Tk 60 crore.

Under the new law, shops with an annual turnover of up to Tk 30 lakh would be exempted from VAT payment. A turnover tax would be applicable for turnovers of Tk 30 lakh to Tk 80 lakh a year, the revenue official told this correspondent.