Budget Analysis: Paying More For Convenience

I've always wondered why did Agora, Meena Bazar, Shawpno charge more compare to conventional departmental stores and other shops for particular products?  Now I know, for few items they charge more for convenience and for few other items it is because these superstores pay extra to government. There is a 107.35% duty on cooling products like vegetable freezer, fruits freezer, ice machine, fish freezer, dairy freezer etc which is highest in the category.

The latest news is: in 2015-16 fiscal budget an additional 2% VAT has been proposed on every sale of any superstore.

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How it is different from conventional VAT

There is a package VAT system for conventional departmental stores and shops under which shop owners pay VAT annually. The amount of VAT under this category ranges from BDT 3,000 to BDT 12,000 based on shops’ locations and sizes. Super shops have been enjoying the same VAT facility for last couple of years until this budget announcement.

Who will be paying the price?

Definitely buyers as a consequence superstores too. People will have to pay extra 2% to buy from superstores means it will be more costly to buy anything from superstores now resulting less people buying from superstores. Now consider why people go to superstores because they want a little convenience, quality, and assurance. Will people be ready to pay a little more for these advantages? May be or may not. But the statistics tells a different story: in last couple of years we have seen decline in the number of superstores, 96 from 105 in a year. Nandan and PQS are closed for awhile now. It means people are not okay with extra charges.

People who go to superstores are middle class and higher middle class. For some of these people, price does not matter. But for a large number of these people price does matter.

Superstores are yet to be a common thing. It is in the rise. In coming days with increasing income more people will be going to superstores but it is not today.

I think superstores need a little space to grow and then once it becomes a mainstream trend, there will be more scope to take benefits out of it.