The government plans a special Value Added Tax (VAT) reduction facility for small businesses to rebound the sector from the adverse impact of the pandemic.

Though the large manufacturers have rebounded from the pandemic's impact, the small sector is struggling to survive. The government is considering reducing existing VAT from 5 percent to 1.5 percent as an incentive to boost the small sector.

The budget related official of the national board of revenue (NBR) said in the global economic context, the country's small businesses are at risk.

In the post pandemic period, they are going through various adversities including high VAT and capital crisis.

If the proposed rate is implemented, the tax burden on the retail and wholesale business sector will be reduced and goods and services will be cheaper. The consumer will be benefited.

Small traders said that 5 percent VAT is too much for them. In order to pay VAT at this rate, their business has to add at least 33 percent value addition.

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But in the current reality, the maximum value addition in this sector is 10 to 15 percent. So, VAT should be levied from this sector on the basis of what is net or actual value addition.

As per rule, the government levies VAT at the applicable rate based on the amount of value added in any business. This VAT is paid at the time of monthly return.

Dr Abdul Mazid former chairman of NBR told UNB, "The main problem of small traders is that they do not keep any account for the transactions they make. That is why no rebate or VAT is refunded from the government. If this could be done, the VAT burden would be reduced.”

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He said, "In order to increase the collection of VAT from this sector, it is necessary to automate all the eligible businesses. In that case, the collection will be many times more than at present.”