What The VAT Row Exposes

A row between NBR and Metro authority Lays bare Metro fare's absurdity.

A row between Dhaka Metro Rail Transport Company Limited (DMTCL) and National Board of Revenue (NBR) has been made a news item.NBR wanted to impose 15% VAT on metro fare. Argument put forward for the proposition is that Metro coaches are air-conditioned and VAT law allows imposition of VAT on such coaches. DMTCL however refused to pay VAT outright. It argued that Metro rail is a mode of transportation for mass people and any imposition of VAT would increase commuting expenses¹.

I am a strong advocate of VAT.However, I found the VAT law argument irrelevant here. Govt has right to impose VAT. Resource-strapped govt has few other alternatives.Metro Rail Act has allowed the govt to set the fare. So air-conditioned coach is a weak argument. Rather financing the budget could be more appropriate.

In Bangladesh, even poor people pay VAT for smoking bidi,for talking to dear ones,for purchasing laundry soap and for buying lifesaving drugs. VAT is everywhere. In that light,there is no wrong to impose VAT on metro fare. The rate of VAT could be the subject of debate or supplementary duty or development duty could be imposed. It could be a better alternative to 15% VAT.

Contrary to DMTCL argument, metro fare has been inflated than the normal fare. Many people would travel if fare were reduced.Slapping additional VAT would not bring much trouble.

Both the fare reduction and imposition of VAT could go hand in hand.Surprisingly, both the seemingly opposite steps may increase revenue. As I have mentioned in an earlier post, reduction in fare would ultimately lead to increase in frequency of commuting and supplementary duties on fare would bring revenue to govt coffer².

Current inflated fare does not bring much revenue. It has been reported that daily operational cost of metro rail is somewhere around Tk 25 million.9000 commuters travel everyday till to date. This means monthly revenue is not enough to meet daily operational expenses. Authority is to blame for this.Significant reduction in fare and fully operational metro could lead it to a profit-making path.

According to a news report,metro rail charges a minimum of Rs 5 and a maximum of Rs 60 in neighboring States of India³. I had the chance to take a ride on Delhi,Kolkata and Chennai metro. A distance between Motijheel and Mirpur-10 would cost me less than 20 Rs. I hardly remember to pay more than 20 Rs to travel a distance between Uttara and Farmgate back in 2013.Even the per km metro fare in metro is higher than the bus fare(Tk2.50/km) in Dhaka. It is absurd and unacceptable. It would not be wrong to say that a section of the authority in connivance with transport businesses inflated the fare. Even the fare is low in inflation-battered Pakistan.

DMTCL is seriously breaching Metro Rail act 2015.Section 33 clearly spells that any obstruction in construction, development, operation and maintainence of Metro rail is a punishable crime (1 year imprisonment or Tk 500,000 fine).Section 42 says that if any licensee commits any crime mentioned in Metro Rail Act 2015 then he will be tried accordingly⁴.

In that light, DMTCL artificially inflated metro fare to serve transport owners’ interest and breached section 33. And therefore guilty under section 42. This argument holds true for one individual employee or group of employees.

In addition, DMTCL also sought Tk 10 billion from govt back in 2022. However, DMTCL could easily lead metro rail to profit-making path by commencing its full operation and lowering the fare.

Making the minimum fare Tk 8 instead of Tk 20 and maximum fare Tk 40 instead of Tk 100,DMTCL could do a great service to ordinary people. I do not know who is calling the shots at DMTCL. If anyone misuses civilian institutions to hurt mass interest,we should try him in civilian court no matter how immune he or she is.We need to create proper laws and fine tuning the existing ones.

Notes And References

1. "Metro Railer Ticket eVat Boshatey Chae NBR(NBR Wants To Impose VAT On Metro Fare)",Daily Prothom Alo(P-10),March 20,2023.
2. " Bangladesh Enters Metro Age: Things To Take Into Account",Rezaul Hoque,January 5,2023.https://hoquestake.blogspot.com.For more read at https://hoquestake.blogspot.com/2023/01/bangladesh-enters-metro-age-things-to.html?m=1
3. "Govt: Metro Rail Fare Based Solely On Operating Cost",Sohel Mamun,Dhaka Tribune,May 06,2022. For more read at https://www.dhakatribune.com/bangladesh/2022/05/06/govt-metro-rail-fare-based-solely-on-operating-cost
4. Dhaka Metro Rail Act 2015