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Basics of VAT

Basics of VAT

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Published by Habibullah Sarker

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Published by: Habibullah Sarker on Nov 09, 2011
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05/01/2012

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Basics of VAT (Value Added Tax)
 
o
 
VAT is imposed on goods and services at import stage, manufacturing, wholesaleand retails levels;
o
 
A uniform VAT rate of 15 percent is applicable for both goods and services;
o
 
15 percent VAT is applicable for all business or industrial units with an annualturnover of Taka 2 million and above;
o
 
Turnover tax at the rate of 4 percent is leviable where annual turnover is less thanTaka 2 million;
o
 
VAT is applicable to all domestic products and services with some exemptions;
Export is exempt;
 Cottage industries (defined as a unit with an annual turnover of less than Taka 2 millionand with capital machinery valued up to Taka 300,000) are exempt from VAT;Tax returns are to be submitted on monthly or quarterly or half yearly basis as notified bythe Government.Supplementary Duty (SD) is imposed at local and import stage under the VAT Act, 1991.Existing statutory SD rates are as follows:(a) On goods: 20%, 35%, 65%, 100%, 250% & 350%(b) On services: 10%, 15% & 35%.
Tax Base for VAT:
 
Import Stage:
 Customs Assessable Value + Customs duty + Supplementary Duty
Domestic/LocalStage:
 a) Goods (manufacturing): [Production cost + Profit and Commission(if any) + Supplementary duty (if any)]b)
 
Services: [total receipts excluding VAT but including supplementaryduty (if any)]
Truncated Base / Fixed Value Addition:
In some of the cases of goods and servicesproducers and sellers face difficulties in availing VAT credit/adjustment facilities due tonon availability of invoices from the sellers of input. In order to remove this operationaldifficulty fixed bases such as 10%, 25%, 30%, and 60% value addition is taken intoaccount for calculation of VAT for a number of goods and services. In suchcircumstances net VAT rate for different rates of value addition comes to 1.5%, 2.25%,4.5% and 9%.
VAT at the wholesale and retail stage:
In case of wholesalers and retailers, there is aspecial provision for a 1.5% percent VAT known as Trade VAT on the total sale,provided that the wholesaler/retailer do not avail the facility of input credit/adjustment.Such tax is also collected at the import stage from importers of finished goods as anadvance trade VAT.

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