Taxes make cement industry reel


The country’s cement industry is facing an uneven challenge for imposition of excessive tax, businesses claim. Currently, Bangladesh cement, after meeting the entire local demand, is being exported to India’s north-eastern states, known as the seven sisters. However, the country’s manufacturers would be able to amplify their exports to other export zones if they could produce goods at a cheaper cost, industry insiders believe.

The country’s existing tax structure is a bar to the expedition of this sector as cement producers have to pay higher amounts in duties against the import of raw materials needed for cement manufacture, they said. According to Export Promotion Bureau data, the country’s export of cement, salt, and stone fell 16 percent in the July-March period of the ongoing fiscal in comparison to that in the same period last year.

During this period, export from this sector fetched $8.16 million where the figure was $9.76 million in the same period last fiscal. Sources said, the country is now self-reliant and meeting the internal demand of cement as all mega projects, like Padma Bridge, Highways, Power Plants are entirely being built with locally-manufactured cement. Bangladesh Cement Manufacturers Association (BCMA) sources said, some 3-crore tons of cement is produced in the country where the local companies have the capacity of 6 crore tons.

As per the latest Global Cement Report of CemNet.com, a UK-based research organisation, Bangladesh is currently the 20th top cement manufacturing country in the world.
Industrialists believe, if the sector is properly patronized, it will very soon be a big export-oriented sector of the country. However, the manufacturers could not fix the finished goods at a reasonable level as they have to pay different types of irrational duties at the import stage.

For example, manufacturers have to pay Tk 500 as import duty against the import of per ton of clinker, the key raw material for cement. Businesses said, the government in general imposes maximum five percent import duty on the basic raw element of any product. However, due to such irrational duty imposition, the traders have to count huge revenue only for importing this cent percent import-oriented element.

Besides, excessive amount of duties are also imposed on the import of gypsum, fly ash, limestone and on other raw materials, leading the businesses to increase production cost several times. In this connection, cement manufacturers have demanded reduction in the specific duty for clinker import, the essential raw material for producing cement, to either Tk 200 per metric ton, or a fixed import duty of 5 percent.

BCMA made the demand in a proposal sent to the National Board of Revenue (NBR) on the next budget for the upcoming fiscal (2019-20). According to the proposal, the cement industry has to pay higher amount of import duties on raw materials compared to those of other industries. The BCMA said, the excessive taxes on cement raw materials had gone against government revenue policy, negatively affecting cement prices.

The cement lobby added, "The country is still unable to produce (cement) raw materials. So, the taxation should be rational for the survival of the sector." Additionally, the proposal put forward four more recommendations, including- reducing value added tax to 5 percent from the existing 15 percent for raw materials; cutting down Advance Income Tax to 2.5 percent from 5 percent; and exempting regulatory duties from fly ash and import duties from cement bulk carriers.

Cement manufacturers urged the NBR to ensure return of the rebated AIT within 60 days, or pay fines in case of late payment. They also urged the board to amend the section 16 and 17 of the Income Tax Ordinance-1984 so that cement companies can get 100 percent rebates, on a case-to-case basis. 

The association said, the sector witnessed a 10–15 percent growth in cement production in the last couple of years, thanks to government’s policy support, making the country self-sufficient in this essential construction element. Currently, investments in this sector have reached Tk 40,000 crore, while around 2,500,000 people are directly and indirectly employed in the sector, according to BCMA data. According to data, there are currently 31 cement companies in the country, having an annual production capacity of 6 crore tons.
Adding to that, almost all companies, considering further export potentials, are enhancing their production capacity, BCMA sources said.