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Manufacturers will mandatorily keep financial records

The customs authorities have tightened its grip on capital machinery import tagging a new condition of financial record keeping by the manufacturers following abuse of the concessionary duty facility.

From now on, manufacturers will have to maintain books of accounts to avail the tax benefit on capital machinery import, according to a Statutory Regulatory Order (SRO), issued on December 22, 2023.

Currently, import of capital machinery for the manufacturing sector requires payment of 1.0 per cent import tax.

“Though we have offered the benefit to facilitate local manufacturing sector, many of the businesses have misused it taking its advantage,” said a senior customs official.

The customs has amended the previous SRO on capital machinery, issued last year, where only submission of VAT returns for 12 corresponding months and industrial Import Registration Certificate (IRC) were mandatory, he added.

Some businesses have availed the benefit by submitting zero VAT returns showing no business transactions, he added.

“As they have no books of accounts, customs authorities cannot verify whether they actually do not have any business transactions,” he added.

He, however, said other SROs of customs on concessionary tax benefit have the mandatory provision on maintenance of books of accounts except the capital machinery’s one.

Mahfuzul Haque Shah, director of Chittagong Chamber of Commerce and Industry (CCCI), said customs has to strengthen its monitoring to check irregularities instead of making trade complicated.

“Already, we need to maintain books of account for complying with the rules of different government agencies, but start-up may face problem to set up industries for the latest condition,” he added.

Import contraction by the Bangladesh Bank (BB) has led to decline opening of letter of credits for capital machinery by 17 per cent while settlement by 36 per cent in the July-November period of FY 24, compared to that of the corresponding period of the last year.