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VAT waiver widens for ship importers

Star Business Report
The import of vessels of5,000 deadweight tonnage (DWT) capacity and above has been exempted from value-added tax in a new effort of the tax administrator to boost growth of oceangoing ships industry.
The declaration comes three months after the National Board of Revenue gave the go-ahead to the VAT-free import of 22-year-old vessels, raising the age limit from 15 years.
Bangladesh Oceangoing Ship Owners Association (BOSOA) has long been demanding a raise in the age limit in line with Import Policy Order 2015-18 that allows the import of up to 25-year-old ships.
The relaxation of the age restriction will be helpful for the sector to flourish, said SK Bashir Uddin, vice-chairman of BOSOA.
"Local investors will come up with new investments and the number of ships will rise."
He said Bangladesh annually imports 6-7 crore tonnes of bulk and dirty cargoes.
It is not viable to carry dirty cargoes that
are used to carry coal and clinker by newer vessels, said Bashir, also the managing director of Akij Group, which has oceangoingships.
The association said the privilege would allow them to buy more vessels and grab an increased share of the $8-9 billion freight charge that Bangladeshi businesses annually spend to export and import goods.
Local oceangoing vessels can tap only 2 percent of the freight charge due to a dearth of vessels, according to sector operators.
The vessel operators demanded the VAT benefit for import of upto 25-year old vessels, as 10 to 15-yearold ships are much costlier, said Md Rezaul Hasan, a member for VAT policy at the NBR.
Investment returns on oceangoing ships generally takes 40-50 years, he said citing ship operators.
So it would be tough for the local operators to benefit from the ships if they buy the high-priced ones, he said. "That's why, we have increased the age limit." The NBR—in its latest order posted on its website recently—also added a condition that vessel importers will have to have a foreign currency account at banks in Bangladesh.
It said oceangoing vessel operators will have to submit certificates or Proceed Realisation Certificates issued by banks to the local VAT office every year as proof of their foreign currency earnings. The other conditions include
compulsory registration of vessels in Bangladesh as national flag carriers and hiring Bangladeshi nationals to fill at least 70 percent of the posts used in operating the vessel.
The NBR said it would realise VAT from the importers for non-compliance with anyoftheconditions.
The revenue watchdog provided the VAT exemption for importing vessels of over 3,000 DWT from 1998 to 2012 and the VAT waiver benefit
was extended to those of above 5,000 DWT in 2012-13. However, the VAT benefit was withdrawn in 2014-15, which hit hard the oceangoing shipping sector, according to the meeting minutes of the NBR.
Between 2013 and 2015, the owners started to get rid of their vessels for falling freight rates and high operating costs, according to operators. Now the country has 35 oceangoing ships, which was 85 four to five years ago.