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Practice of Vat Collection in Promotion of Revenue of Bangladesh
1.1 Introduction
Final version of the value added tax act was promulgated 31 may 1991 as a presidential ordinance with eight sections (relating to registration under VAT system and the appointment and powers of VAT authorities). It was made effective from 2nd June 1991, the value added tax bill 1991 was introduced in the parliament on 1st July 1991 and the parliament passed it on 9th July 1991, with the presidential assent to the bill on the next day it came into effect on the value added tax act 1991. the vat act 1991 replaced the business turnover tax ordinance 1982 and the sales tax ordinance 1982 with effect from 1st July 1991. it imposed VAT @ 15% on importer or supplier (producer) of taxable goods and provider of taxable services having annual turnover of Tk.1.5 million of more. It imposed turnover tax (TT) @ 2% (currently 4%) on supplier of taxable goods and provider of million (Tk.2 million a present). The new Law imposed VAT at zero-rate on export sales of any goods and services. Brought excise duties on most goods under the VAT net and services which are luxurious and non essential are socially undesirable.[1]
Value Added Tax (VAT) a percentage tax on the value added of a commodity on service on each continent stage its production and distribution in completed. VAT may be classified in three ways! (i) On the basis of coverage of stages throughout the production and distribution stages, or confined to limited stages- manufacturing plus whole sale, or whole sale plus rattail: (ii) On the basis of the method of calculation tax credit method, subtraction method, and addition method; and (iii) On the basis of tax treatment of final-product capital goods such as machinery, equipment, and suppliers the consumption form the income form as the product variety. These three broad types of VAT are the gross national product (GDP) type, in come type and consumption type. A consumption type VAT is an indirect tax. An income type on a GNP type VAT might be considered as a direct tax but a commodity tax cannot be considered so. Consumption type VAT is also considered as on alternative form of sales tax.
Value added tax (VAT) is an indirect tax. Since it is ultimately borne by the consumers of goods or services, it can be grouped with expenditure tax. The basic principle of VAT is that a tax is levied on the value of goods and services at each stage of production and Supply unit until it reaches the final consumers. In effect it is a form of tax chargeable to the sellers of all outputs with the ting provision that in computing their liability, organizations or individuals may deduct any VAT paid on the inputs used in the production of their goods and services. The process goes on until the goods and services reach the ultimate consumers who can neither shift nor adjust the whole of VAT on the value of goods or services they have chosen to consume. But VAT has changed the scenario. Its base has been expanded significantly with the expansion of manufacturing and service sector in the economy.
Value added tax Act. 1991 comprised of three areas of taxation i.e. VAT, supplementary duty and turnover tax. Supplementary duty at varying rates is charged on certain luxury and non-essential goods or services at import and manufacturing stages. Turnover tax however, is charged at fixed rate of 4% on annual turnover of below Tk. 20 lacs subject to the fulfillment of certain other conditions. There are three classifications of goods or services for the purpose of VAT in Bangladesh. They are VAT chargeable, exempt and zero rated goods or services. VAT is charged at standard and uniform 15% on the value addition made by manufacturer or trader at different stages of production of goods or services and in that sense VAT is directly proportional to value addition.[2]
1.2 Objective of Research:
The object of this paper is also to help the tax Collection and VAT payees so that they may be able to understand:
a) How to bring transparency in the taxation system and to reduce harassment on VAT payment system of consumers/VAT-Tax payers.[3]
b) To identify easy VAT system against present cascading taxation at different stage of production & services.
c) How consolidate the tax administration beside to introduce quality VAT management system.
d) To highlight the important features of business on the VAT-Tax net.
e) To bring a consistency in the tax –GDP ratio.
f) To emphasize on the provision of amalgamating VAT system with reform of new easy VAT system.
g) To create competition, diversification of services and better services to the consumers or VAT payers which ultimately increase Government Revenue Collection.
h) To emphasize the role on modern technological advancement VAT system that will be ensure optimum consumer services and help in avoiding the unnecessary complicacy of different stage VAT formalities by the consumers.
i) How the rights of the consumers are violated and what steps should be taken for protection of that right.
j) To make the awareness of the consumers and how they shell be benefited.
k) To emphasis expanded of the area of VAT and in which may be consider.
l) To identify adequate infrastructure a business/consumer friendly VAT policy, which ultimately boosting over all Tax revenue.
m) Provided the concept more consumption will bring more VAT resulting in a increasing of overall internal revenue received.
n) How to adopt pragmatic approach keeping both revenue targets and public welfare in mind. Etc.
1.3 Research Methodology:
Follow the thesis paper format/guidance provided by the course Lecturer and tried to collect the information suitable for the paper. The information is primary and secondary in nature. Secondary information was collected form mainly Business week, The Financial Express and Nation’s business magazines, Different digital Sources, journal, Magazine, NGO Report, NRB Report, Annual Report, Government Gazettes, Notifications and Text Book & Different Statutory orders etc. collect to the information suitable for the thesis paper.
This thesis paper is made mainly based on the secondary Sources.
Characteristics of VAT & Function of VAT
2.1 Definition of VAT
Generally VAT means, Value added Tax (VAT) is a percentage Tex on the value added of a commodity or services as each constituent stage of its production and distribution is completed. On the other side VAT is a consumption Tax or Indirect Tax. It is a Tax on value addition in course of selling on transferring goods or services. Basically rate of VAT is 15% for all import, locally manufactured, traded goods and services.
The VAT is payable against supply of goods or services rendered when the intermediate event amongst the following occurs: When taxable goods imported, when goods and services are delivered or supplied on the invoice issued or when goods/services are delivered for personal use or consumptions. As collected from buyers/consumers.
Its (VAT) is a neutral & multi stage taxation system which collected at every stage. Its main philosophy is not to affect the cost of manufacturing or distribution and collected on final Consumption/Consumer or final price, and consumption type VAT is also considered as an alternative form of sales Tax, effect from July-1991.
The basic principle of VAT is that a tax is levied on the value of goods and services at each stage of production and Supply unit until it reaches the final consumers. In effect it is a form of tax chargeable to the sellers of all outputs with the ting provision that in computing their liability.
2.2 Different Stages of Value Addition Tax:
Value Addition = Wages (Salaries, Utilities, Overhead Expenses) + Profit.
Or. (Output Price – Input Price) = Value Addition
Or. (Selling Price – Purchase Price) = Value Added,
And
| A | B | C | D |
| Import Input Price=300/- | Import Input Price=600/- | Import Input Price=800/- | Import Input Price=1000/- |
| VAT=45/- | VAT=90/- | VAT=120/- | VAT=150/- |
| Value Including VAT=345/- | Net Tax (90-45) =45/- | Net Tax (120-90) =30/- | Net Tax (150-120) =30/- |
| Import Stage | 1st Producer | 2nd Producer | 3rd Producer |
| Revenue =45/- | Revenue =45/- | Revenue =30/- | Revenue =30/- |
| Total Government Revenue = (45+45+30+30) = 150 | |||
For goods produced or manufactured or imported, purchased, acq2uired, of otherwise collected by any registered persons in the course of business operation or expansion, VAT is to be paid at the time of one of the following activities whichever occurs first: (a) when the goods are delivered or supplied: (b) when an invoice relating to the supply of goods in given; (c) when any goods are used personally or given for use to another person; and (d) when the price is received in part or full. For services rendered by any registered persons in the course of business operation or expansion, VAT is to be paid at the time of one of the following activities whichever occurs first: (a) when the services are rendered; (b) when an invoice relating to the rendering of service is given; and (c) when the price is received in part or full. For goods or class of goods for which the NATIONAL BOARD OF REVENUE (NBR) has ordered through the official Gazette notification to use stamp or banderole or special sign or mark having security system of specified value on package or carrier or container or the goods, VAT is to be considered as paid equivalent to the value of the stamp of banderole or special sign or mark used.
2.3 Explanations on various VAT Laws, rules, SRO’s, Regulating of VAT in Bangladesh.
- SRO No. 173.Law/2004/419- Mushak dated 10June 2004 with the short title rules 2004 for charging tax on certain services based on actual rate of Value addition at present there are 35 service under the truncated system which are stated below. Like Motor garage, Workshop, Dockyard, Construction Firm, Ware house & Port, Advertising Firms, printing press, Medical Institution, Procurement Provider, Transport, Freight & Forwards, Contractor & Higher etc. It is the extent of value addition deemed to be made by certain service providers on which standard 15% VAT is chargeable.
- Ref. file No. NBR/VAT/51/91/170 dated 27 July 1991. Following service providers have been allowed to issue tax inclusive invoice without showing separately the amount of Value added tax: 1) Hotel and Restaurant, 2) Decorator and caterers, 3) Construction Firm, 4) Printing Press, 5) Land Development Firm, 6) Indenting Firm, 7) Travel Agency, 8) Survey Firm, 9) Sweet Meet Shop, 10) Freight forwarder etc.
- VAT on insurance Companies (General order No. 10/mushak/2002 dated 28-11-2002). All Premiums on fire, marine, air motor accident, health care etc. other then like insurance premium VAT at 15%.
- SRO No. 172-Law /2004 / 418 mushak dated 10 June 2004 value added tax for traders and smell retailers and shops in different areas at the country has been fixed up. Deemed value addition for traders in all areas is 15% and taxable at 15%.
- Appellate tribunal under Sec. 196 of the customs acts 1969. The Government shall constitute on appellate tribunal to be called the customs, Excuse and VAT.
- Ref: Value added tax (VAT) in Bangladesh. M.A Baree P-22, 27
- SRO No. 260-law/2004/431 Mushak dated 30 August 2004 dealing with advance VAT Payment by Commercial importers. According to the above SRO, Commercial importers shall have to pay advance VAT @ 15% on the3 total arrived after adding custom duty supplementary duty and development surcharge it any with the custom approved assessable Value and 10% or Value addition.
- Through SRO no. 168/2003/376, Mushak cottage industry products other than the excision lit, have been fully exempted from VAT and Supplementary duty provided such Industries.
- SRO No. 178-Law/91/3 Mushak Value Added Tax Act 1991 (No 22 of 1991) these rules shall called value added rules, 1991
- Notification No. SRO No. 73-Law/97/1700/ Custom date4d 19 March 1997. In exercise of the proper Conferred by section 19 of the custom (Acct. in 1939) close 14(1) of the VAT Act 1991. Exemption designed to encourage power generation.
- According to SRO No 117/law/2002/342-Mushak, Date 6June 2002. Procurement Provider men’s any person organization or Firm who supplies any goods or services in exchange of consideration to any Government or Semi-Government autonomous organization. NGO, Bank, Insurance or Limited Company against quotation or tender.
- There are 73 sections in the Value Added Tax Act. 1991, 43 rules in the Value Added Tax 1991. Numerous SRO’s, Circular, Directives and Officers form the overall regulatory frame work for charging and machination of VAT Collection System in Bangladesh.
2.4 Determination of VAT
a) For Imported goods:
CIF Value 100/-
Custom duty (Imported) 15% 15/-
Supplementary duty for Base Value 115/-
Supplementary duty 20% 23/-
Base Value for VAT 138/-
VAT 15%
20.70/-
b) For Goods Supply (Manufacturer – Local):
Factory Value 100/-
Supplementary duty 20% 20/-
Total Base Value 120/-
VAT 15%
8/-
(Considered raw materials, production cost, profit & fees and charges except AIT / VAT all duty & Tax included).
c) For Services:
Monthly Telephone Bill 50,000/-
VAT 15% 7,500/-
2.5 Characteristics of VAT
a. Vat has no cascading effect or no tax on tax because of credit mechanism.
b. Self-Assessment / self clearance/Self Policy system
c. Built-in cross audit feature.
c. Easy apply/Universality.
e. Trade friendly & mostly single rate.
2.6 Main features of VAT & Rates of VAT
a. Vat is imposed on goods as services at import stage, manufacturing, wholesale and retails levels;
b. A uniform VAT rate of 15% in applicable for both goods and services;
c. 15% VAT is applicable for all business on Industrial units with and annual turnover of 2million and above;
d. Turnover tax at the rate of 4% (4 percent) is livable where annual turnover is less then taka 2 million.
e. VAT is applicable to all domestic products and services with some exemption;
f. VAT is payable at the time of supply of goods and service;
g. Tax paid on inputs is creditable / adjustable against out put tax;
h. Export is exempt 0% for all exported goods
i. Preferential rate of 4% for small-scale business (Turnover tax).
j. Cottage industries (defined as a unit with an annual turnover of less then Tk.2 million as with a capital machinery valued up to taka 3,00,000).
k. Tax returns are to be submitted on monthly quarterly on half yearly basis as notified by the Government.
l. Supplementary duty (SD) in imposed at local and import stag under the VAT Act. 1991. existing statutory SD rate are as folios;
a. On goods; 20%, 35%, 65%, 100%, 250% & 350%
b. On service; 10%, 15% & 35%
m. Excise duty (Bank deposit & local air ticket only).
n. Truncated bases (1.5%, 2.25%, 4.5%, 5% & 9%)
2.7 Tax Base For VAT
A. Import Stage
Customs Assessable Value + Customs Duty + Supplementary Duty.
B. Domestic / Local Stage
§ Goods (Manufacturing) : [Production Cost + Profit and Commission (if any) = Supplementary duty (if any)]
§ Service : [Total receipts excluding VAT but including Supplementary duty (if any)
C. Truncated Base / Fixed Value Addition
In some of the cases of goods and services producers and sellers face difficulties in availing VAT credit / adjustment facilities due to no availability invoices form the sellers of input. In order to remove this operational difficulty fixed beses such as 10%, 25%, 30% & 60% Value addition is taken into account for calculation of VAT for a number of goods and service. In such circumstance net VAT rate for different rates of Value addition comes to 1.5%, 2.25% 4.45% & 9%.
D. VAT at the wholesale and retail stage
In case of wholesalers and retailers, there is a special provision for a 1.5% percent VAT known at trade VAT on the total sale. Provided that the wholesaler / retailer do not avail the facility of input credit / adjustment. Such tax rate is also collected of the import stage from importers of finished goods as on advance trade VAT.
E. Tariff Value For Imposition of VAT
Under the VAT law, the government is empowered to fix tariff value for some items for the collection of VAT. Example: Tariff value for mild-steel products produced from imported / locally procured re-reliable scraps in Tk.4000.00 per MT. normal VAT input credit is also no available under this system.
F. Deduction of VAT at Source
As deduction at source is also practiced in case of VAT on certain services, Government, semi-Government autonomies bodies, NGO’s, Banks, Insurance Companies and limited companies are authorized by the govt. to deduct applicable VAT on the services at source.
G. Exercise Duty
At present excise / excise duty applies to only two homes, Bank deposits and domestic air ticket (Tk.250 per Journey)
2.8 Registration for VAT
· All importers, exporters, manufacturer / supplier of goods & services render.
· Any tax payer run more then one business from different place must register separately for each.
· All business having a VAT threshes hold.
[Failure to register despite legal obligation perishable offence]
2.9 Registration
· Application in form musak-6 along with;
· Photograph (2 copies) as tax identification number (Tin) Certificate.
· Trade license & lease agreement / rental document.
· Bank accounts number & IRC, ERC (if necessary)
· Musak-7 (Blue print, goods, input etc) for production
· Others (as per requirements)
2.10 Central Registration
· Have to have permission for WBR
· Opportunity to pay VAT from central premises for all branches
· Business & accounts controlled centrally.
· Applicable for service rendering and trading stages.
Except Manufacturing Stage
· Registers kept centrally but commercial records in all branches.
· List at all branches & duty as applicable elsewhere VAT-11 challan issued centrally.
2.11 How are to Pay VAT
· VAT registration is mandatory
· At import stage importers pay VAT in BOE along with customs duty
· Business pay VAT as they collect in course of selling goods and services
· VAT collected at sources
· Commercial importers pay VAT as “Advance trade VAT” @2.25% at import stage, retailers mainly pay VAT 1.5%
2.12 Advance Trade VAT (ATV)
· Introduced 22-09-04
· Paid at import stage for commercial importers
· Assessed in import BOE
· Value addition 15% for all & rate of advance trade VAT 2.25%
· Normally not creditable & refundable.
2.13 ATV Exemption
· Goods in 1st schedule & service in 2nd schedule
· Govt., semi-Government, Autonomous, Embassy, Diplomats, Educational & Religion detention
· Bond licensed 100% export oriented in destroy
· Baggage rules & temporary import etc & exempted by SRO’s
2.14 ATV Refund
· If construction firm, tender bidder, supplier pay VAT more then ATV.
· Application to divisional officer, sec.-67 & rate-34 kha.
2.15 Payment of VAT to Govt. Treasury
· Bill of entry at the time of importation returns
· Account current & treasury challan along with returns
· VAT payment code 1/1133/000/0311
· SD payment code 1/1133/000/0711
· Turnover payment code 1/1133/000/0921
2.16 Value for VAT (VAT Calculation)
Import Stage:
· Assessable Value (AV)= Cost (FOB Price)+Freight + Insurance + Landing or landing charge = Base Value for duty
· Custom Duty (CD)=AV X % of duty
· SD = {(AV+CD) X % of SD}
VAT = {(AV+CD+SD) X % of VAT}
Duty paid Value = (AV + All duty & Taxes)
Local Manufacturing Stage:
· Price of raw materials (in put)
· All import duty and taxes (except VAT and AIT if paid at import stage).
· All wages & expenditure related to its production / sole commission etc. and profit.
· Expenditure includes Packing Materials, Electricity, Gas, Telephone & other service- like WASA, Transport, Insurance etc.
· Trade discount (Max 30 days in any 12 mounts & WMT 15% of actual value) Ref : Sec 5 (2), VAT Act.
VAT Calculation or Production Stage:
Assessable Value (AV)=(All input price + Commission + Charge + Fee + All duties & Taxes Including SD + Profit) – VAT if paid before.
SD = AV X % of SD
VAT = (AV + SD) X % of VAT
Duty paid Value = (AV + All duty & taxes)
Whole sale Price = (Duty paid Value + Min 10% Value Addition) X 15%
MRP = (Wholesale Price + Min 10% Value Addition) X 15%
Tariff Value
· Fixed base value for manufacturing products
· Total VAT = Tariff Value X 15%
· It is easy to apply
· Generalized & rationalized for particular products.
· Credit mechanism does not work
Example:
Manual cigarette & Biri, All papers, Brick, GP & E.I sheet MS Products. GI wire, Blode, Ship, Serape, Cold rolled cal diesel engine etc.
2.17 Obligations of VAT Unit
· Declare value (for mfg only) & Maintain records of sale and purchase
· Issue invoice ( Mushak-11, 11 Ka) &
· Make payments to government treasury & submit returns
· Period: Normally within 10 working days of the following month insurance-20 days.
2.18 Invoicing
All VAT registered units must issue invoice in prescribed form (Mushak-11, Mushak-11 Ka) to the buyers, invoice includes the following information:
· Suppliers name & address, Invoice number, VAT Reg. number
· Customers name & address, Date of supply, Mode of transport
· Description of the supply to identify, Quantity & Tax Inclusive price
· The amount of VAT or VAT & SD of applicable, paid
· It can be manual or computerized (Permission from Commissioner) Rule-16 (3Kha), 17(2Kha) & 18 (3)[4]
2.19 When to Pay VAT
The VAT is payable against supply of goods or service rendered when the immediate event amongst the following occurs:
· When taxable goods imported (pay width import duty)
· When goods or service or delivered or supplied
· When the invoice issued
· When goods / service are delivered for personal use
2.20 Mode of Payment
For all taxable goods & services treasury challan with return by adjusting the position balance of account current.
2.21 Record Keeping
Every manufacturing have to maintain the following Books of Accounts:
· Purchase register (Mushak-16)
· Sales register (Mushak-17)
· Account cornet register (Mushak-18)
· Treasury challan
· Invoice or challan book (Mushak-11) & Return (Mushak-19)
2.22 Tax Compliance (Returns)
· Submit monthly return to the circle office (M-19) two copies with 10 working days of the following month (insurance 20 may WI)
· The return must be enclosed with
· In case of production, supply or export
o Original copy of account current (where applicable)
o Any offer documents demanded by the commissioner in case of providing & export service
o Original duplicate copies of TR challan (where applicable)
o Any offer documents demanded by the commissioner. Ref. S-35 & R-24.
2.23 Rights of a VAT Unit
· Right to written notification in case of inspection by a VAT officer
· Right to getting a copy of inspection report within a stipulated time.
· Opportunity to self-defense in writing
· Opportunity to being heard
· Right to appeal to he commissioner as regards the value determined by a divisional officer.
· Right to appeal to the commissioner (Appeal) as regards any decision gives by an officer below rank of a commissioner.
· Right to appeal to customs, excuse & VAT Appellate tribunal when aggrieved by a decision of a commission or commissioner (Appeal)
2.24 Refund
· Application within 6th month
· Provisional assessment for customs
· Application to divisional officer, commissioner has appointed office (but not below he)
· TR-31 form application (Verified by treasury officer)
· Approved by A/C or appointed officer
· Decision within 90 day
· Pre-audit clearance
· Account currant adjustment is not refundable
· Followed by treasury rules. See-67 / rule-34 Kha.
2.25 Different form on VAT
· M-1 : Input-output ratio & value declaration, R-3 (1)
· M-1b : Business / Commercial importers value declaration
· M-2b : Annual declaration of Turnover, R-4 (2b)
· M-4 : Return of Turn Over Tax, R-4 (4 & 5)
· M6 : Application form for Reg./enlistment (VAT, TT, |CI)
· M-6a : Application form for Renewal of registration
· M-8 : VAT Reg. TT/CI Enlistment certificate, R-11/4 (2)
· M-11 : Invoicing, R-16 (1)
· M-11a : Sales cash memo, R-16
· M-11b : Invoice verification (official), R-16(4) &17(3)
· M-11c : Invoice (Owners supply to manufacture)
· M-11d : Invoice (Service VAT), R-16 (1)
· M-14a : Machinery Import without VAT, R-20(3)
· M-15 : Declaration for Stock of Raw Material, R-11(1)
· M-16 : Purchase Accounting Book, R-22(1)
· M-17 : Purchase & sales A/B for TT, R-4(16)
· M-18 : Account Current, R-22(1)
· M-19 : VAT Return, R-24(1)
· M-20 : Exportable goods release application, R-27(2), etc.
Financial Analysis
3.1 Value Declaration & Approval
1. Base value declaration value including input output co-efficient in form M-1
2. Registered person may supply goods on assessment & payment from the date on the basis of that declaration.
3. Any change on amendment submits new declaration in the form M-1, 7 Investigation, Survey market value of identical or similar goods kept in the circle on division office or office of the commissioner within 15 days that-
a. Base value is inconsistent with sec.-5 of the act. or
b. Base value is less then the value of the similar goods on same nature on quantity of same or any other jurisdiction:
c. Value addition as shown in form M-1 is significantly low ; or
d. Value in significantly low because of any relationship between supplier & purchaser.
e. Opportunity of being heard & determine the appropriate base value by the divisional officer will be effective from the date of such declaration.
4. Process within 15 working days on shall be deemed or not have any objection to that value
5. Trade discount (Max 30 days in any 12 month & NMT 15% of actual value) & publish in a national daily & inform divisional officer also.
6. Commissioner VAT may suo moto or on application or market price can fix base value.
7. Aggrieved Reg. person can apply within 30 days & commissioner should given decision within 15 days.
8. Board may constant value review committee on the request from divisional officer or commissioner.
9. Price list of the goods shell be affixed in such a place so that it can easily be sighted.
10. In case of TV Reg. person shall submit input output co-efficient in M-1A to the division officer of approve after security & correction. Charge on amendment needs to be heard.
11. For service, board, by general or special order direct to declare value for assessing tax and determine the procedure.
3.2 Tariff Value
· Fixed base value for manufacturing products.
· Total VAT = Tariff value X 15%
· Easy to apply, No value declaration required.
· Generalized & rationalized value particular products.
· Credit mechanism does not work
· Input output co-efficient to be declared in M-1
3.3 Determination of value for service
Section 5(4)- total receipt against the service provided. Government can fix value for charity service & back calculated value ban be imposed.
3.4 Truncated base of VAT service
It is only for services, truncated base for services at different rates.
Ref: SRO 173, air/2004/419-VAT: Date. 10/06/2004
1. Motor garage, Workshop & Dockyard 4.5%
2. Construction firm 4-5%
3. Printing press (only service S + input value) 4-5%
4. Auctioneer 15%
5. Freight for wanders 15%
6. Gold & silversmith jewelry (service) 1.5%
7. Consultancy & supervisory firm 4.5%
8. Medical center 2.25%
9. Procurement provider 2.25%
10. Audit & accounting firm 4.5%
11. Security service 4.5%
12. Coring / transport contractions 2.25% & 4.5%
13. Archive, interior decorator & designer 4.5%
14. Electricity distribution 5.0025%
15. Warehouse & port 15%
16. Land development & building construction 4.5%
17. Courier & EMS (on service) 4.5%
18. Transport rested 4.5%
19. Banking & non Banking (Fee, charge) 15%
20. Travel agent 15%
21. Restaurant 9%
22. Indent firm 15% Etc.
3.5 VAT From Services at Source
· 22 services for deduction at source
· Gourmet points: in most case service receivers
· Government, Semi-Government, Autonomous organization NGO’s Bank, Insurance & Limited Co.
· If manufacturing supplier goods as procurement provider through tender participation then need not deduct at saver. ***
· Deposit in TR-7 from on book transfer within three working day
· A/c no. 1/1133/0000/0311, *** file no-6(3), Date-28/09/02
· Section 6(4ka) & Goner order no. 23/97 805/09.
VAT for Services at Sources (26)
1. Motor garage, Workshop` 4.5%
2. Dockyard 4.5%
3. Construction Firm 4.5%
4. Advertisement Agency 9% & 15%
5. Printing Press 4.5%
6. Survey Firm 15%
7. Consultancy & supervisory firm 4.5%
8. Isaraden 15%
9. Audit & accounting firm 4.5%
10. Procurement provider 2.25%
11. Transport contractor 2.25% & 4.5%
12. Rent-a-Car 4.5%
13. Attended in a Bard Meeting 15%
14. Buyer of auctioned goods 1.5%
15. Auctioneer 15%
16. Courier & EMS 4.5%
17. Travel Agent 15%
18. Maintenance firm 2.25%
19. Vendors / sellers of lottery ticket 15%
20. Security service 4.5%
21. Engineering firm 15%
22. Repairs and service center 15%
23. Decorators and caterers 15%
24. Legal adviser 4.5%
25. Architect interior decorate & graphics designer 4.5%
26. Aircraft or helicopter chartered or redial 15%
3.6 Responsibility to Deduct VAT at Source
· Deduction and deposit of VAT payable on certain services 4 mandatory: See 6(4 Kha) & 6(4 Ga)
· Certificate of deduction to be given to the service render
· Interest @2% to be paid in case of no deduction or non-deposit.
· Deducting authority will be dealt with as if the authority is a service render.
· Penalty not exceeding Tk. 25000/- to be imposed by the commissioner in case of failure.
3.7 Books of Accounts
· Mushak-11, 16 & 17. Account curried book (Mushak-18) is not usually required for service render with the exception of cinema halls.
3.8 VAT on Bank, Insurance, Hotel & Restaurant
· Banking & non-Banking service provide (all commission, fee, charge) 15%
· Insurance (on all premium) 15%
· Hotel (normally on sale) 15%
· Restaurant (normally or sale floor show 9% and
· SD (if service alcohol drinks on arrange any floor show) 10%
3.9 Advertisement Firm, Construction Firm, Building Developer, Furniture
· Advertise Firm- Government, Semi-Govt.,
Government Bank & Insurance 15%
· Private, NGO, Private Bank & Insurance
(other then classified advertisement) other 9%
· Construction firm (on quoted value) 4.5%
· Building Developer- on sale or handed over value 1.5%
· Furniture :
· Manufacturing stage 4.5%
· Show room sale (provide 4.5% paid at Mfg. stage) 1.5%
3.10 Supplementary Rate on Services
· Hotel & restaurant (alcohol on floor show) 10%
· All kinds of SIM card supplier 35%
· Cinema Hall 35%
· Satellite channel distributor 25%
3.11 Return Submission
· Mushak-19
· Tax period
· One calendar month, three months (TT) & Six months
3.11
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The breakup of Contribution of NBR is as Follows:
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The report said the revenue earning, during the year 2008-09, 33% of VAT (Local Stage), 40% of Customs duty (Import Stage), 27% of Income tax and 20% of VAT from others Stage of the total revenue earning during the year (2008-09). The report said total Vat is (33% + 20%) = 53% of the contribution of NBR against national collection.[5]
A) The pie Chart Shown Contribution of NBR (Year-2008-09), against revenue collection through Duty & Vat and Income Tax.
The direct income tax proportion in around 27% of the total earnings of the Government, on the other hand, the indirect tax like VAT is around 33.99%, Import Duties and Supplementary Duty 38.09% and others .77% of the total collection of the revenue, year 2008-09.[6]
B) The breakup of Contribution of NBR is as Follows: (July to Dec.)
Current financial year revenue collection exit target from July to Dec. (First 6th months), Achieve against target 101.24%, Compare to test year import stage growth is 9.44%, VAT (Local)-Mushak growth is 26.31.[7]
3.13 Rate of VAT
- Basically 15% for all imported, locally manufactured, traded goods and services.
- 0% for all exported goods.
- Preferential rate of 4% for small-scale business (Turnover Tax).
- Cottage industry (On duty & Taxes at all).
- Excise duty (Bank deposit & Local air ticket only).
- Truncated bases (1.5%, 2.25%, 4.5%, 5% & 9%).
- Fixed duty.
3.14 Fixed VAT-TAX (SRO-172/04)
- Dhaka & Ctg. city cor. area — 4200TK
- Other city cor. area — 3600TK
- District city municipality area — 2400TK
- Other area of the country — 1200TK
It is applicable only for small retail business of shop. Payment should be made annually once or monthly installment.
Administration and Adjudication
4.1 VAT Administration
Administration by NBR (VAT Wing)
· Chairman, Member, 1st secretary, 2nd secretary
· 7 VAT Commission rate (Commissioners office)
· 32 Divisional office and
· more then 112 circle.
4.2 What is Adjudication?
Adjudication in VAT and customs administration is a quasi-judicial process through which a competent VAT officer is empowered to adjudicate cases involving irregularities, non-compliance, tax evasion and other delinquencies.
Quasi-judicial: Having characteristics of a judicial act but performed by an administrative agency or official
4.3 Offences for adjudication
Minor
1. For not getting registered despite obligation;
2. Fails to submit a return within the specified date
3. Fails to inform any changes about registration or
4. Fails to comply with the direction of summons (S-25)
5. Violates any other provision of this Act,-
Major
a. Fails to give a tax-invoice or gives untrue invoice;
aa. Fails to pay revenue through directed twice, or fails to submit return after lapse of time specified.
b. Submits untrue material information return; or
bb. Attempts to evade VAT by supplying goods without
M-17 & payable VAT in M-18; or
c. Evades or attempts to evade tax by submitting forged or false documents to a VAT officer;
cc. Fail to present document documents if asked twice by the officer or
d. Non preservation or destroys or alters document or mutilates any part of document; or demonstrates it to be false; or doest preserve it as per requirement
e. Makes consciously a false statement or declaration; or
f. Obstructs or prevents from entering VAT officer; or
g. Engages himself in believe that VAT or, other duties payable on such goods has been evaded; or
h. Takes input credit through forged or fake invoice; or
i. Evades or attempts to evade VAT or SD; or
j. Gives an invoice in which an amount of VAT is specified, though he is not a registered person; or
jjj) Removing goods or rendering service without positive balance of A/C
k. Does or abates in doing anything specified in clauses (a) to (jjj)
-Ref: Sec 37, VAT Act.[8]
4.4 Penalties:
Minor
Fine not<5 thousand & not>25 thousand taka
Major
Fine not<Equal to & not> Two & half times of the evaded duties
- Irregularities other than evasion
Fine not<10 thousand & not>1 Lack taka
4.5 Competent VAT officer
· Superintendent
· Assistant Commissioner
· Deputy Commissioner
· Joint Commissioner
· Addl. Commissioner
· Commissioner
· Commissioner (Appeal)
4.6 Power of Adjudication
Adjudication of Duty evasion & confiscation cases:
Rank Value of the goods
· Commissioner => exceeding Tk. 1500,000/-
· Add. Commissioner => not exceeding Tk. 1500,000/-
· Joint Commissioner => not exceeding Tk. 1000,000/-
· Deputy Commissioner => not exceeding Tk. 500,000/-
· Asstt. Commissioner => not exceeding Tk. 300,000/-
· Superintendent => not exceeding Tk. 100,000/-[9]
Adjudication of irregularity cases: Divisional Office
In case of adjudication involving penalty only-
· Divisional Officer —full authority
· “value of goods” does not include the value of conveyance
4.7 Adjudication process
· Case in writing
· Issuing of show-cause notice (SCN) in writing
· Personal hearing [Sec 37(5)]
· Issue adjudication order
· Opportunity of summary adjudication.
4.8 Dispute Settlement
Administrative process
· Commissioner VAT (particularly for value approved by divisional officer)
· Valuation Review Committee (Constituted by NBR)
· National Board of Revenue
Judicial Process
· Commissioner Appeal within (3+2 months)
· Appellate Tribunal (3 months)
· High Court/supreme court & Tax Ombudsman
4.9 Appeal
Authority Appeal to Deposit
Up to Add. Com. Com. Appeal 10% of the demanded
Commissioner Tribunal Duty, if not 10% of
Com. Appeal Tribunal the fine (09)
Tribunal High Court no
Time period for application 3(three) Months.
Only Com. Appeal can permit another 2 (two) more months.
Appeal decision should be given within 9(nine) months otherwise the appeal shall be deemed to have been granted by the appellate authority.[10]
Amount payable at the time of filing appeal:
a) 10% of the tax demand including penalties when appeal is filed to the Commissioner (Appeal)
b) 25% of the tax demand including penalties when appeal is filed to the Appellate Tribunal against the order of the Commissioner or any other VAT officer of the same rank and status.
c) 15% of the tax demand including penalties shall have to be deposited to the Gove. Treasury or to any VAT officer so authorized by the Gove. For this purpose when the appeal is filed against the order of the commissioner (Appeal)
(Sub-section 2 of section 42)[11]
4.10 Record Keeping
Record Keeping and Accounting in VAT
Importance of record keeping in VAT
· Account or Record based tax system
· Audit based
· Payment & Credit not acceptable without recording or documents
· Tax Liability determination
· Legality
Characteristics of VAT as a Tax System
· VAT is livable at every stage of value addition
· Self assessment system
· Accounting & Audit based
· Credit mechanism functions
· Business friendly & helps industrialization
Keeping Records
· Legal Requirement, Sec-31, rule-22
· When and how long?
From the time of job 4(four) years Sec-33
In case of undecided cases till the final disposal
Record Keeping (mainly)
Every manufacturer has to maintain the following Breaks of Accounts:
· Purchase register (Mushak-16)
· Sales register (Mushak-17)
· Account Current register (Mushak-18)
· Treasure Challan
· Invoice or Challan book (Mushak-11)
· Return (Mushak-19)
Record Keeping
| Nature of Business | Register | Records / Documents |
| Producer | Purchase | Purchase of goods & Services |
| Sale | Supply of goods & Services | |
| Account Current | Treasury Challan | |
| Mushak-11 | Return copy | |
| Input | BOE Copy | |
| Production | Credit & debit note | |
| Export Shipping Bill | ||
| Service | Purchase | Purchase of goods & Services |
| Sale | Supply of goods & Services | |
| Mushak -11 | Treasury Challan | |
| Input | Return copy | |
| Production | Import & Export BOE Copy | |
| Credit & debit note | ||
| Export Shipping Bill | ||
| Commercial
Importer |
Purchase | Purchase of goods & Services |
| Sale | Supply of goods & Services | |
| Account Current | Treasury Challan | |
| Mushak-11 | Return copy | |
| Import & Export BOE Copy | ||
| Turnover | Purchase & Sale | Return (Mushak-11) |
| Annual declaration | ||
| Registration no. & cash memo |
4.11 Commercial Documents
Books of Account or files or any documentation
Example- debit- credit voucher, cash memo, daily sale, purchase accounts, cash book, Primary & journal book, Ledger, bank account, Financial statement & Analysis, Profit & Loss account, profit & loss appropriation account, Bank account reconciliation & balance sheet & all related documents including Audit reports.
VAT Accounting and Payment Procedures:
Procurement of inputs
· Entry (+)in the Purchase Register
· Entry (+) in the A/C Current Register for input credits
Using inputs
· Entry (-) in the Purchase Register
Manufacturing outputs
· Entry (+) in the Sales Register
Supplying goods / Rendering Services
· Entry (-) into the sales Register
Issue Invoice
· From the VAT Challan Book
Payment/Adjustment of duty
· Entry (-) in the A/C Current Register for output tax
Delivery of Goods / Services
4.12 Books of Records
· Account Current register –M(18)
· Whit is account current?
An account maintained with the commissioner by a registered person in a specified form in which detailed of purchase, sales treasure deposits, payable & creditable VAT & where applicable, other taxes shall be entered.