The sale of the city super markets has marked significant fall following the government’s imposition of four per cent VAT on essential items in the current fiscal year, Bangladesh Superstore Owners Association (BSOA) leaders said on Wednesday.
A buyer has to pay additional Taka 40 as VAT for purchase of daily essentials like edible oil, wheat, sugar etc. of an amount of Tk.1000. But if those items are procured from the grocery shop they don’t have to pay any VAT, said BSOA leaders.
Many customers need to be explained about VAT at the time of payment of bills as it was merely two per cent last year while it was 1.5 per cent in the previous year. Some of the superstores have already suffered heavy losses having cleared space rent and payment of salary for their employees following higher VAT charge.
“It is a discriminatory policy. It is not only hampering growth of the sector but also depriving the government from earning revenue,” President of Bangladesh Superstore Owners Association (BSOA) Niaz Rahim said.
This policy of the government holds back the sector’s growth, he said, adding the overall sale growth of the sector has declined by eight to ten per cent after July 2012 following the imposition of the new VAT rate.
They sought government policy support including reduction of VAT, duty-free import of machinery and a single authority to monitor the sector.
The new challenges are also standing on way to the future investment in the sector as many are planning to open more outlets but the prevailing situation holds them back, Niaz Rahman said.
Nandani Bazar, a superstore at Kakrail has also been experiencing sim ilar experience of fall in its sale for higher VAT charge, said Gazi Muhammad Mamun, manager of the store.
“We maintained a growth between 20 to 26 per cent since January to June 2012 compared to that of previous year but the sale has dropped significantly during the last six months,” Chief Operating Officer of Meena Bazar Shaheen Khan told The New Nation.
“This is because we collect VAT at 4.0 per cent rate from the customers resulting in a negative impact on them,” he explained.
Around 38,000 shops, including supermarkets, are now in operation in city, he said, adding supermarkets have to pay four per cent trade VAT while other shops pay VAT at a flat rate.
The government should introduce a flat rate VAT for all the market players to protect consumer’s interest, said M. Rahim, who is also group director of Rahimafrooz that operates Agora. Another retail giant Shwapno is also deeply concerned over the situation.
Echoing the association chief, Executive Director of Shwapno Sabbir Hasan Nasir said, “The business model of Shwapno is somewhat different from other chain superstores as its targeted customers are the middle and lower middle-class people.”
Facing financial crisis, Nandan another retail group, was forced to shut down three out of its five outlets last year, insiders said.The sector insiders were worried over the monitoring system as there is no unified standard.
Authorities like City Corporation, BSTI, DC office, commerce ministry and Consumer Rights Protection Department operate mobile courts, BSOA secretary Zakir Hossain said.
“We are not opposed to mobile court operation but there should be co-ordination among them with a single standard,” he said. “We all want to protect consumers’ right by providing quality and safe food, give us a unified standard and we will follow it,” the BSOA president said.”The government’s agencies should act as facilitators not administrators,” the Shwapno official said.
There is good potentiality to attract investment in the sector as it has been playing a positive role in changing life style, ensuring stable price of essentials, creating employment opportunity for educated, semi-educated youths and also helping the government to earn revenue, M. Rahim added.
If the sector gets government’s policy support, investment worth TK 1.0 to TK 1.50 billion will be invested during the current fiscal ( 2013) as many business men are contemplating to go for expansion and open more and more outlets, he said adding Agora has plan to open six more outlets by the year end.
The government collected Tk 300 million revenue in 2011 from the small sector, which contributes only 2.0 per cent of the total retail market, he explained.
“Superstore is a volume-based business. The more outlets we open the more will be the sale as we will be able to serve more customers,” M. Shaheen said adding they have plan to open more 50 outlets by 2015 which has become uncertain following the higher VAT rate. Shwapno is planning to spread across the country by 2015.
Superstore owners have to pay up to 105 per cent in duties on import of capital machinery relating to the sector while other industries pay a maximum of 5 per cent which is hurting growth of supermarkets in Bangladesh, leaders of the sector said.
-With The New Nation input
