WELCOME To The Presentation On INDIRECT TAXES (VAT & CUSTOMS) ‘Academic Course undet “ Course A 408 : Taxation” for the BBA students cf 18th Batch sthSemester IBA ,Dhalca University Organized by Institute of Business Administration ( IBA ) Dhaka’ University July—Devember 2013 INTRODUCTION TO THE COURSE TEACHER MD. AEDUL KAFI COM ISSIONER LARGE TAXF AYERS UNIT, VAT Courst: Schedule (A) Value Added Tax System in Bangladesh Date & Time ‘Course Contents o a | ‘September [© Bret history on introdu‘tion of VAT system in Bangladesh, 25,29, and | Organizational structur’'and menpower of Bangladesh VAT October 02, Contribution of VAT in te NBR Revenue 06, 09,20 & 23 | Basie concepts & deter ination of VAT (2013) ‘The Actand the Rules “Texes under VAT syster, VAT a trade ovel and ATV Rata of VAT, truncated bse systom fr services and tai value for goods ‘Aoplcable area of VAT Exemption of VAT and $0. Exomption benefits for otage Industries Input tax creat mechan am. How does th tax cout rebate system work at iferent level ofa business ‘supply chain under the AT system 2 Importance of valuation under VAT system 1000.11.15 0Date & Time Course Contents @ _§ @ Do |B Business process under VAT system (a) Responsibilities ait duty-ycle of taxable person (0) VAT Registration {c) Whon VAT is payab {8} Who wil pay VAT and other rlated tax {6) VAT payment proce Suro and time frame {f) Procedure to be maintained for delivery of goods and rendering of (a) Record Keeping by the Taxpayer (Tax involeo (i) Other documents (ii) Submission of VT Return Deduction of VAT ats urco Dispuste resolution anc Alternative Dlapute Resolution (ADR) Export incontives, dut? drawback Refund in VAT System Enforcement and Audit mane: Factore and constrals In VAT management of Bangladesh Reference Books ESC TCM NEAT ARATE TM is OT ar aR eI AR 6 RETA — FR: en CIO FET ARCTRT FH RA, Fae @ wae — Tag BreTTT ATT Oy ARCATA Be OR BENTH Om. TRA, Referer, ecaTT Tate 6 Faber — cate SRST TERT TT ae ter 1 — 8, on ay ae Tolley’s Value Added Tax —Rharon Davies & David Rudling The Modem VAT — Intemational Monetary Fund (IMF) Value Added Tax : Concept and Pre ctice — Alan A, Tait Value Added Tax (VAT) in Bangladosh-M. A. Baree The VAT Guide (Notice 700 March 1996, HM Customs and Excise, U.K) New Zealand Goods and Services vax Legislation Key issues in Tex Reform Edited by Cedric Sandford (Article: Issues in ‘Adopting and Designing A Value Aeded Tax by Sijbren Cnossen) © Administrative and compliance cost: of Taxation by Cedric Sandford ‘and Michaa! Godwin Velue Added Tax Systom of Banglalesh : Act, Rules & Procedure 4 — Dr. Md. Abdur Rout. oooo cucoocoogContinued... (8) Customs Manaxjement and Formalities Bate BT Cours Conan a) (2) Ociober 27, |= Ogeiznna aire ad anpawarc Bongdeah ons 308 a Revenue performane? of customs November 3, oun and Tene ier Cotone Managaront (atta) [2 tentvogme in eangacesn 2 reins & Restos on Ingo & Expr roses |. imeston oy 2. Sxmpons 2: Viton ranscton le metadata 2 iter, Ceram procdre 2 Bilt Export xpe proceso 28, oue Asem of ty 2: Bonded warehouse 2 Auction f 5 Reference Books (B) Customs Management Formilities : The Customs Act, 1969 Customs Act, 1969 — Najib. Choudhry Aspect of Customs Law — Abdul Latif Sikder Valuation Considerations for Bangladesh Customs — Abdul Latif Sikder The Customs Act — Dhaka Law Report Bangladesh Customs- Act ank! Policy —Mohammad Zakir Hossain = sro saree TERA — Ec, WORT TETINDIRECT TAX (A) VALUE ADDED TAX (VAT) SYSTEM IN BANGLADESH BRIEF HISTORY ON INTRODUCTION OF VAT Background : Just before the introduction of VAT the Excise Duty (as Indirect Tax under the Excises and Salt Act, 1944 was the domestic source ol Fovenue for the Govt. of Bangladash 2 Business Turnover Tax (BTT) for 8 sorvices under the Business Tumover Tax Ordinance, 1982 The revenue from BTT was very Insignificant. Sales Tax on some selected gouds at the import stage under the Sales Tax Ordinance, 1982. © Taking the pressures for reducing the revenue dependence on customs duty into an account. NBR used to increase the rato of taxes every year and the incidence of tax on tax (cascading effect) wae hampering productions and trades. Conth wed ... With the narrow base and regressive nature, the major domestic revenue sourc> Excise system was unable to e the increasing need of revenue for the Govt. the development of the —country. QConsidering all those things, the Government of Bangladesh lastly decided to, leave, the Excise system and fo introduce the modern VAT system. C It was also decided to introduce the VAT system by replacing the Sales Tax (chargeable at a different rates at import stage), the Excise Duty (chargeable at a different rates on locaily produced goods and rendered services) and the Business Turnover Tax (chargeable at a rate of 2% on some local small units). At the time of introdiiction, the VAT system was introduced only at the import stage, manufacturing stage and service renderitig stage, except trade level. But now it is extended to all levels with wholesale and retails. ——— elContin 16d ou. © With the recommendation anc! help of International Monetary Fund (IMF) and World Bank (VB) VAT Act and Rules were drafted. © The Customs and Excise Department was entrusted to implement the VAT system in Bangladesh. © VAT system was introduced cn 2nd June, 1981 through promulgation of Value Added Tax Ordinance, 1991 (Ordinance 26 of 1991). © Atthe Budget (FY 1991-92) tine the Value Added Tax Act, 1991 was passed by the Parliament and then signed by the Hon'ble President in due course. At the same time the Value Added Tax Rules,1991 was also formulat id by NBR under the VAT act. Conti awed Disadvantages of Excise System Narrow tax base Different rates with some higher ratéi Rate of taxes was increased every yeqr Cascading effect of taxes were hampering production and trades Unable to mobilize the increasing net of revenue Foreign debt was increasing day by day and development program was hampered Advantages of VAT System: Modern and progressive tx system vith input tax credit mechanism Single standard ate of 15% Audit and account based sytem minimicing harassment and forcible enforcement Broaden tax base and ensure propordionte low tat ie No cascading elect of taxes ax om 2) Balanced tax system with eguity Minimizes tax evasion and coat of tax collection Increases domestic revenue reaizaticn hecooo ooo ORGANIZATIONAL STRUCTURE AND MANPOWER OF BANGLADESH VAT ‘Ministry of Finance has four divisions : Internal Resources Division (IRD) Finance Division Economic Relation Division (ERD) Bank & Financial Institution Each division is headed by a Secretary and each of them are separately reportable to Hon'ble Finance Ministr. National Board of Revenue (NBR) is: vorki (IRD). Secretary, IRD is the Ex- Officio functional wings. Value Added Tax (VAT) Customs Income Tax under Internal Resourees Division airman of NBR» NBR has three Each wing of NBR has separate Mes bers. Now VAT wing has three Members. AIl the twelve functional Commission rates and two Directorates are functioning tunder these three Members. The funstion and organizational structure of NBR and Bangladesh VAT is given below ; Comin... MAIN FUNCTIONS OF NBR 2 FORMULATION OF TAX POLICY AID REVENUE BUDGET 1 FORMULATION OF TAX RULES AND REGULATION © COLLECTION OF DIRECT AND INDIRECT TAXES ADMINISTRATION OF — \ © Income Tax 1 Value Added Tax © Travel Tax © Supplementary Duty © Gift Tax © Turnover Tax © Customs duty © Excise Duty © Regulatory Duty | @ IDSC TO PROVIDE WAIVERS AND INCENTIVES UNDER DIFF. TAX LAWS | TOGIVE SUGESSIONS AND OPINIONS TO GOVT. ON VARIOUS FISCAL ISSUESConti wed wo... National Board of Revenue (NBR) Administration of Direct Taxes & Indirect T: Ministry of Finance feo | [omar | (Soma eae ier ‘Nana Board of Revenue (NERD ] Functional Wings: Lo VATWing 2 Cates Wag 3 Income an Wag ‘© Infrmtin Technology © Capiralntligence Cel (CIC) La omer a Continued .... ORGANISATIONAL STRUCTURE OF BANGLADESH VATContinued ORGANISATIONAL STRUCTURE OF VAT FUNCTIONAL UNITS IVAT Field Administration) Se + Exch Commusonersie Oe is handed bys Conniesionr, Dvion Ofce i headed by « DopuovAauan®Conmisure ara Cele Oto mages bys Reranse Omen (20), Cee Oe 12ers ow evel ofc VAT ste Balch which cect dsl wih pape and Continued Number of VAT ‘Offices under VAT VAT Commissionerates 2 Directorates 2 VAT Divisional Offices 8429) VAT Circle Offices : 254 (111) VAT Ranges/ Areas 1270 (540)Manpower under VAT Continued ‘Member VAT 3 VAT Commissioners 12 Director Generals 2 ‘Additional Commissioners 2 Joint Commissioners 30 ‘System Analyst / Senior Program mer 2 Deputy/Assistant Commissioner 210) Programmer / Assistant Programmer 15 Revenue Officer 562 ‘ARO 3125 ‘Computer Personnel GJ ‘Ministerial staff 1835 ‘Motor Vehicle Driver 341 ‘Sub-Inspectors 233, ‘Sepoys t 1964 MLSS : 375 Total = 8324 (5084) * CONTRIBUTION OF VAT Like other developing countries, trade-based taxes dominated the tax structure with’ customs duty alone accounting for more than 51% of total NBR revenue. After introducing VAT in Bangladesh tax_system, gain from VAT revenue was quit: impressive (55.63% of total tax revenue in 2011 - 2012), it recorded to 28.4% of total revenue during 1990-1991. Historically, revenue collection of NBR does not always reach the target but it recorded surplus in FY08-09, F¥99-10, FY10-11, and FYI1-12 and the collection of FY 1-13 was also satisfactory in the context of international sind domestic real This outcome of the recent VAT collections is quite pressive though VAT system is not fully modernized and exist a lot of exemptions and is suffering from acute manpower. A lot of scope still remains to boost up VAT revenue collections if a. modern and efficient VAT system could be implemented (rough initiating different reform measures and adequate manpower and logisties are provided. 18 7 AContinued ‘Twenty two year old Bangladesh VAT has contributed a very handsome share in the NBR revenue which is shown below REVENUE PERFORMANCE OF VAT, CUSTOMS, INCOME TAX & NBR TOTAL, 2S - Rei Figi tein Crore Tey ——_TouaTT— 120000 400000 80000 60000 40000 20000 0 : |Customs BincomeTax_#VAT_SNBR VAT Revenue (VAT+SD+Tumovel Tax+ Excise Duty) includes both Import & Local level 6 Conthaued so. REVENUE COLLECTION BY THE VAT WING IN COMPARISON TO TOTAL R!=:VENUE COLLECTED BY NBR. 10Contnived. Number of VAT Registered Units/ Taxpayers under VAT system of Bangladesh (As on 3! July, 2013) Manufacturing Units | 51,244 Service rendering Units (e cluding 1,67,419 construction units) Construction Units 241,134 ‘Trader (local) 2,89,017 ‘Trader (Commercial Impo-ters) 1,11,023 Importers (excluding Com n. Imp.) 21,499 Exporters 40,560 Total No. of VAT Registered Units | 9,21,896 | oooo cooug Continued Main Features of Banglailesh VAT Self assessing, se accountng, se dj siting and sol clearance system -Agvalorem tax system wth Invoice binging supply ! delivery Unitorm, single standard rate 15% Ia Sage) send alone semptn on pina oid unscesaeg intemal balance and equitable treatmert Liberal treatment ike turnover tax and ¢ottago industries facilities for the small units. Aim of ination of eascading effect ( No Tax on Tax). Goal to establish the system as Audit aid account based. Zero rato on all exports, deemed export: and foods for consumption outside Bangladesh and other goods supplied t) an out going conveyance. tboth the import and local level and Turnover Tax at the local VAT acts Positive and helpful for maximizing revenue realization. tua "1Continued The Concept and Letermination of VAT Value Added Tax is a tax on consumer expenditure and is collected on business transactions and imports. ‘The basic principle is to charge VAT at each stage in the supply of goods and services (output tax). If the customer is registered for VAT and uses the supplies for business purposes, he will receive credit for this VAT (input tax). The broad effect is that businesses are not affected and VAT is actually borne by the final consumer. ‘According to Carls. Shoup, ° VAT i business firm, through its acti from other business firms”. a tax on the value added by a , to the goods and services it buys. ‘According to Bannock & Peacock, * VAT is a tax on final consumption which is collected at every stage nf production and distribution rather that at the retail stage alone”. In other words, VAT is an expendi ure tax or a transaction tax or a consumption tax. pe 2 Continued The Concept and Determination of VAT Value: Here the Value means the Value on which the VAT will be calculated or assessed or iniposed, but not the Value in common sense or in Economic: Value Added: added Value is jhe value that a manufacturer or a service renderer or a businessmai_ add to his inputs or raw materials or other purchases by the time he sells the product or service. In other words, the added value is the differential amount between the sales price and the input cost. ‘And the Tax here is, the tax on thiit Added Value; and that's the Value ‘Added Tax (VAT) stands for. ‘So, Value Addition = Sales Price - Ir put (raw mate.) cost And VAT = Output Price x 15% — inp st price x 15% (if any) {the rate of VAT in Bangladesh is uniformly 15%] Th. 150 x 15% ~ 100. 156 Tk. 22.50 ~ 15.0¢ 50 (Net VAT) vat 12The Act and the Rules O Value Added Tax (VAT) is administered under the Value Added Tax ct, 1991 and the Value Added Tax Rules, 1991 and the SRO’s and Order’s made there-under. The Act contains 73 sections, 3 Schedules and the Rules contain 42 rules and 27 Forms. Now the Act contains 101 scctions, 3 Schedules and the Rules contain 53 ru es and 39 Forms. 2 TAXES UNDER VAT SYSTEM The under mentioned taxes are administered and realized under VAT Act and Rules /nade there-under : (a) Value Added Tax (VAT) (b) Supplementary Duty (SD) (c) Turnover Tax (TT)! (d) Advanced Trade VAT (ATV) Duty Drawback or Export Rebate against the VAT, SD, Customs Duty (CD), Exeise Duty and other duties & taxes paid or the inputs used at the time of manufacture of goods or rendering of services or paid at the production level are given under VAT Act. ! pe 13Cont iwed SUPPLEMENTARY DUTY (SD): Goods and services socially undetirable, luxurious and not essential mentioned under the Third Schedule of the VAT Aet are subject to SD uunder VAT Act [Section 7 and S20] at a rate ranging from $% to ‘500%, such as: 5%, 10%, 18%, 20%, 25%, 30%, 38%, 39%, 45% 56%, 59%, 60%, 61%, 93.24%, 100%, 150%, 250%, 350%, 500% The SD imposed major items are : Goods : Import Stage + Fresh and Chilled Tomato, Fiozen shrimp, Fresh and dried Nut, Fresh and ried Fruits, Spices, Finished Chocklet, Beverage, Biscuits Marble, Granite, Cement, Petioleum products Detergent powder, Mosquito coi, Printed PVC Sheet Toilet paper, Tissue paper, Oven fabrics, Carpet jamond, Imitation Jewellery. furniture and spares Explosive powder, Revolbar, Pistol and other fire Arms, Liquor, Motor Vehicle, Biri, Cigarette, Unmanufactured tobacco. ‘Tobacco refuse, Non aleoholio beer, © TV, Reftigerator, VCP, VCR, vCD, DVD » Conti ued .. Goods : |.ocal Stage + Cigarettes, Biri, Zards and Gool, + Natural Gas in gaseous form + Shaving materials, Perfume, Cosmetics And other luxury goods + Oriented strand board and the board similar type, Fiber board, Plywood, Vine! board, Panels and similar types, Paints ‘+ Mosaic cube and similar goods, Ceramic Tiles, Bath tub, ‘Jikuzee, Sink, Basin ad other bathroom fitting and fixtures. L + Other Filament lamp, Excepting ultra violet/Infra-red lamp and float glass. + Beverage and Energy’ frink, Fruit juice and Fruit drink + Mineral water (up to £ liter) Services : Local Stage + Satellite channel distributor + SIM Card supplier + Hotel and Restaurant (with liquor or Floor show) ete. 20 4 14TURNOVER TAX Continued ‘Turnover Tax is administered undir VAT Act and Rules. It is a liberal and easier tax treatment for the smal enterprises (production and services) [Sec 8, 16 and ruled} Turnover means total money receis ed or receivable in a certain period by a registered person against his gocds manufactured, service rendered or goods supplied. Turnover Tax means the tax payable on the said total money under section 8 of VAT Act,1991 and rule 4 of VA Rules 1991, Who is eligible to ay Turnover Tax Yearly turnover not more than tk, 80 lac, ie upto 80 lac VAT is exempted and Turnover Tax is payable. Rate of turnover tax to be applioc @ 3%. G_Notlisted in the SRO No. 183-law/2012/641-Mushak, dated:07 June,2012, 27 goods and 63 services Continued Procedure to be maintained for Turnover Tax Application (Mushak- 6) to t1e Divisional Officer, VAT Issuance of Enlistment cer ificate (Mushak- 8) by the Divi Officer, VAT within 02 (two; working days. ‘Two copies of annual turnovr declaration (Mushak- 2Kha) to the Divisional Officer, VAT Estimated annual turnover and turnover tax declaration to be submitted every year subseq tently by the tax payer within 30 (thirty) days of the date of Elilistment. After examining the declaration; the amount of annual turnover and ‘Turnover tax ought to be ap))roved by the Divisional Officer Approval eter tbe tne )y the Divional Mier witha 30 Tu oo oo ty) working days Wer tax is payable on the date of issuance of Enlistment certificate by the Divisional Officer Deposit the amount of turng ver tax fo the Govt. treasury under the account code number 1/1133 0010/0313 ‘Submission of turnover tax f:eturn (Mushak- 4) along with treasury challan to the Divisional Officer of VAT for every tax period ooooo 0 A 16comued Responsibility of a person liable to pay Turnover Tax * Application tothe concerned Civisional Oficr of VAT with Form lushak-6 + Enlistment by the concerned Divisional Officer of VAT with Form Mushak-8 + Issuing of cash memo with serial number at the time of supplying goods or rendering services using Enlistment number on it. + Payment of turnover tax monttly/quarterly/ yearly basis. + Submission of turnover tax Return (Mushak-4) in every tax period + Registers and documents to bu maintained: Purchase register (Mushak-11) Sales register (Mushak-17) Counter foil or copy of cash memo Copy of turnover tax Return (Mushak-4) Documents relating to import and export (if any) Relevant commercial documents + Allthe documents relating to turnover Tax to be maintained for 6 years Continued. + Penal provision [Rule 4 (13 Ka)] — Penalty of Five thousand taka in each case against failure to pey turnover tax in due time —Imposition of 2% inierest against the unrealized turnover tax + Arrear turnover tax to be realized under section 56 of VAT Act and Rue 43 of VAT Rules Ae 16VAT AT TRADE LEVEL AND ATV | Attthe time of inception of VA.T in Bangladesh it was not applicable at the trade level. was applicable at the import level production level ‘and service level only. Later on in 1896 only 12 luxury items at the trade level were brought under VAT. After words the items were increased to 60 within some ears. But the result was not satisfactory. In 2001 all tho itoms are brought under VAT at the Trade level. To impose and realize VAT from trade soctor of Bangladesh the traders ‘was defined in a different way. Trader means a person who sales or otherwise handover the goods to other person in exchange of consideration without changing any Shape, nature, characteris'ics or quality of goods imported, purchased, achieved or other vise collected by him. [Section 2th tha tha tha) 2 Commercial Importer moans a person who sal handover the goods to. othur person in exchange of consid without ‘changing any’ shap ature, characteristics or qua goede imported by him extupuing the goods described in th edule. {Sectonzqratha)) NBR by notification in the official gazette may fix the “rate and amount of value addition” of any gootls or class of goods at trade level. [Section 52) Realization of VAT ly of goods by the Commercial Importer, ‘trader Rules, 2012. 2 Commercial Importer : ATV to be pad atthe importing Customs station through Bil of Entry atthe time {he import vel dots ae pl : 2 , Bose value for ATV : tipped acsesatle value + Customs Outy {6D} + Supplementa (So1"t*any) * Other Dulles & Taxes (except VAT SEE aodtsny (excep » under sion (2) with the “forma rule 3) to the fat for tha next supply and taxes to be pald @ 15%, 2 Goods to bo supplied subject to oayment of taxes and issuance of "Mushak-t1" Sienna chaapatrs, © VAT paid at the import level and as ATV may be taken as CrediRebate against ses Subject to the provi ton of section 8. © Commercial importer should mai fain accounts undor rule 22 but “form-ka” may be maintained Instead of Books accounts for purchase (Mushak-tB) and Books faccounts forsale (Mushak-17). Payable tax to be pald with the head of accounts “ttsa/concemmed Cofmmissionerate cor ng VAT return (Mushak-18) to be submitted to the focal VAT office by 49" of the nex! month for ATV. es An 1 There is 9 negative: 17QLocal Trade Base value for VAT : (Purt hase value + 26.67% (value addition) x 4%, lo,t89 on 26.67 (amount of value addition). {2 Value to be declared under section 5(2) with the “form-tkha” (rule 3) tothe Uiigonar Oificer of VAT for sippy of goods and taxes to be paid @ 18%. Goods to be supplied subjret to payment of taxes and Issuance of SGshakcit” and *Mushak-11 a” chalianpatra. VAT paid at the carier staye may be taken 2s CredivRebate against Payatie taxes subject to the provision of section 8. {D Local trader should maintain sccounts under rule 22, but “form-ka” may be aiatalned instead of Books of accounts for purchase (Mushak-16) and Books of accounts forsale (Mshak-t7). Payable tax to be paid with the head of accounts "1/1133/concerned CSlamiestonerate gouel03t1" and VAT return (Mushak-t9) to be submited forthe local VAT office by 188 of the next mor The rate of value adcition fo pharmacoutical and petroleum substance: Wl be counted a6 13.29% ancl 2% VAT wil be calculated on the total value ‘ofthe supplies. Gin case of payment on the oa Claimed. But one can pay VAT at the rae of 15% on actual basis declaring value and maintaining fequired Register» and formalilies [according to ideal VAT ‘jalan in that case, (VAT = fle valu ™ 15% ~ Purchase value * 15%)... of truncated base, no rebate can be Continued ... Trade VAT for Small Retail, Traders ‘The small retail trader whose annual turnover is not over tk. 70 lac he can pay VAT as per the amount mentioned in the table below: Si] Applicable Area | Max. Vaiue Addition | Rate of VAT | Mini. Payable No. per year VAT per year @ @ re @ @ +. | Dhaka & Chittagong 73:334.00 18% *1,000.00 City Corporation 2,_| Other City Corporation 8 334.00 15% 18,000.00 Municipal Area of “40 000.00 18% 6,000.00 District Town 4. | Other Area of the 20 000.00 18% 3,000.00 Country VAT may paid annually or monthly basis, © The small retail trader will have io maintain purchase documents, cash memo and “books of accounts for sales’ so A 18RATE: OF VAT Standard/uniform rate of 18% on all VAT applicable goods and services. Though there :ire some applicable net rates for services like, 1.50%, 2%, 225%, 4%, 4.5%, 5-5%, 6%, 7- 5%, 9%510% ete. But practically these rates come from the truncated base for assessabl> value for VAT of some specific service items. If the truncated base value of an item is made tk. 30 over market price tk, (00, then the amount of VAT at the rate of 15% on tk. 100 will be tk. 4.5, That it is generally, but unofficially known as 4.8% VAT on the total amount. Zero rate on all exports, deemed exports and foods for consumption outside Banglidesh and other goods supplied to an out going conveyance. ' (Section-3 ) a Contin dn Rate of VAT in different countries [Name of Countries | Yr ofiniro | Standard rate (%) | Reduced rae (%) ‘Austria 1973 20 12,10 Argentina 2 10.5 Germany 1968) 16 7 | Denmark 1967 2 = Thailand 1992 7 — South Africa 4 an South Korea 10 _ Nepal 4 B ‘New Zealand 1986 2s = Canada 1991 7 5 Japan 1989) 3 = Italy, 973) 9 49 19‘Name of Countries | Vr ofintro | Standard rate (V4) ] Reduced rate (6) Pakistan 1998 18 1 France 1968 | 196 Bangladesh 1991 15 Belgium wa 2 136 India 2007) 128 a UK 73 17.5 5 | Sweden 1969 | 25 12,6 Spain 1986 | 16 mM Greece ws7 | 18 48 Turkey 1985 2 8 * APPLICABLE AREA OF VAT From the very inception, VAT was applicable on most of the goods and a few number of services at the rate of 15%. Twas inposed by replacing the Sales Tax (chargeable at a different cates at import stage) aad the Exeise Duty (chargeable ata diferent rates on locally produced goods und. endered services) and the Business Turnover Tax (chargeable ata rate of2% on some local small unis). Under VAP Act Supplementary Duty SD) at dierent rate is appieabie on sme soods and services. {Section 7| Q__ Under VAT Act and Rules x Turnover Tax (TT) atthe rate of 2% was introduced on actual turnover of goods and services not exceeding Tk. 500,000 Later om the rate ‘was upgraded to 4%. Now (@ 3%, if th yearly turmover i nt over 80 ac. [Rules] tthe early stage some high revenue sielding goods like cigarette, Biri, natural zo, petroleum products ele. were hept und r the Excise Duty System to avoid the revenue sks, Tar base was broadened time to time py bringing some new goods and new services under the VAT network. The lst of exe nptions is being shortened every year Section gy 20Contin sed. VAT Levi-able on (Are: of Applicability): Q All exports, deemed exports All goods under the H.S. Nomenclature ex::epting the following: {Section3.a) + All exports, deemed exports and foods for consumption outside Bangladesh and other goods supplied to an out going conveyance. + All goods under Second ‘schedule of Nareotie Control Act, 1990, incase of manufacturing in Bangladesh. So, VAT is applicable at import level, service rendering level and trade level also. + Goods described under tle First Schedule of the VAT Act, such as: live animals, meat, fish, fresh milk, unprocessed agricultural products, natural sands, rough timber, raw silk cocoon, raw wool, raw cotton, raw jute ete., + Goods and services under ihe Turnover Tax. Contin... VAT is applicable on all services exzepting the services described under the Second Schedule of the VAT Alt, such as : Basic services to live on, Personiil Services, Social welfare services, Medical and Health services giyen by the private sector, Library, ‘Museum, Art gallery, Zoo, Bjtanieal garden, Transmission of Radio and TV (excepting other commercial activities), Taking deposit and savings by Bank ;1nd Financial Organization, Life insurance policy, Savings, SEC, Transportation of Passenger (without AC) and goods, Air lines (excepting the farm rents Chartered plane and Helicopter), religious activities, Postal service (excepting Courier ind Express. mail service), all charitable and scientific service activities provided for pul t, Stevedoring and Hand operated laundry and cleaning jes (except services provided in hotel and mechanized laundry), ete. Services under First Schedule (Part-2) ofthe Excises and Salt Act, such as : Services rendered by Bank or Financial Institutd and Services rendered by alr line A 2EXEMPTIONS OF VAT AND SD EXEMPTIONS [Section 14] Govt. by notification in the fficial gazette exempt VAT or SD on importation or supply of any goods or class of goods or on rendering of any services subject to some c0 iditions and limitations. | NBR may by special order exempt payable VAT or SD on any importation of goods, receive of supplies or receive of services subject to some limitations and concitions in view of enforcement of any international or bi-lateral agrecment on reciprocal ba: (NBR may by special order «xempt VAT or SD on importation or supplies of any taxable goods.or on services rendered mentioning the reason in each ase. Goods: Live saving drugs, Plastic kite’ten items, Water bottle, basket and Tiffin carrier used by the schoul children, Plastic hanger, hand fan and some other plastic items, Kitchen and household utensils made of aluminum, MS sheet, Tin or steel (enameled or otherwise colored), Some medical’ instruments’ apparatus, Agricultural machinery and instruments, fiome scientific instruments, Books, booklet, news paper, periodica s and journals, Computer software, ‘computer and accessories, computer ribbon and modem, Aireraft’s and parts thereof, Chem. fertilizer, insecticides, fungicides, herbicides, Copra’ waste, ‘mustard’ oil, full fat soybean, Contraceptives, Sugar and molasses, loaves and bread, Biscuit hundred taka per kg) cake (hundred taka per kg-xcept party cake) Jute goods, electricity, power generator, Hard board, newsprint (in roll or sheet f9°m) Handloom fabrics of synthetic fiber and cotton, Silk yarn, plastic or rubber sandal (up to ‘Tk.100/pair), Ball pen, wood pencils, type writer, Spares of textile and jute mills, Packed liquid milk, ghee, butter, curd (excepting sweet curd), Hurricane light; kerosene burner, Tractor, power tiller (excepting prime mover) «te.Continsedne Tax exemptions for Cottage industries: Goods produced by the cotiage industries exempted from VAT and SD under some conditions mentioned below as per the SRO No-172-Law/2013/676-VAT, Dated 06 June, 2013 issued under section 14(1) of VAT Act. Conditions : For the purpose of the SRO, Ccttage Industries means — It should not be a joint stock company (ii) Its Invested capital for plant, michinery and equipment at any time in the year should not over taka 40 lacs (ii) Its Annual Turnover not more than taka 60 lacs > This Cottage benefit may be taken through certain procedure : ' > There is a negative list of items for cottage benefit “ Contnved Negative List for cottage benefits: Palm oil (all sorts), Coconut oil (all sorts), CDSO, Soya bean oil, Tea, Logence, Biscuit, Chanachur, Juice, Energy drink, Mineral water, All types of Cigarette and Biri, Zarda, Gul, Antiseptic, Disinfectant, Medicine, Paints, Pigments, Varnishes, Polishes, Perfume, Water used jn cosmetics, Cosmetics, Sun sereen or Sun tan material, Hair items, Tooth paste and like items, Shave and after shave items, Deodorant, Air freshener, coo 0000000N0N0Centinued.. Seap (all sorts with Liquid, PVE pipe, Bricks (all sorts), MS. Products, Metal container, Super enameled copper wirt, House hold fan (fitted with cleetrie motor of production capacity not over 125 watt) Dry coll battery, Storage baitery, VCR, VCP, Radio and Transistor excepting one band, Television (all sorts), Electric bulb, Wires and cat les, ‘Transport (all sorts) and Its body and chassis, Cruise Ships (all sorts), Excursion Boats, Ferry boats, Cargo Ships, Berge and Similar ships for carrying passenger and goods, 1g Boats, Factory Ships and Other ships, Used for preparing and preserving goods like fish, Yates and other boats, Rowing boats and canos for games or entertainments, Tugs and Pusher craft, Rubver and Plastic foam. a © 0 © Caaae00 90000 Giintinaed Procedure: Fulfilling the above SRO conditions the manufacturer of VAT payable goods excepting the goods under the negative list will apply to. the Divisional officer of VA'T in form mushak-6 with a declaration in ‘form-ka’. After enquiring into the matter, if the Divisional officer is confirmed that the applicant has fulfilled the conditions as per the SRO, then he will enlist the applicant as a cottage industry in form mushak-8. The enlisted person will maintain an accounts of transaction in ‘form-kha’ and at the time of supplying the goods, he will always issue a cash memo mentioning the enlistment number.Continutd. VAT Exemption on Services: Temporary Hotel and Restaurant; cold storage; Classified ‘Advertisement in the News peper; Printing charges on books, Periodicals and Educational meterials for the students; Binders, Internet (in case of rendering service to educational Institution only), VAT payable on Insurance premium by Private Sector Power Generation Company, Specialist Doctor, Travel agency, Supply of School Tiffin, Organizer of Cultural Function performed by foreign artist [ less than Tk100 per ‘single entry J, Specialist Doctor, Transportation of food grain, Laiid seller, Power used for irrigation, Small Tailoring shop for Dhaka & Chittagong city and non-AC Tailoring Shop for other part of the country, Tourist place or installation (including historical-place), Man power exporter, Stock broker and other broker, Tour; operator, Purchase of rubber as industrial raw material through auction by an industry, Private University etc. “ Continu 24... Exemption at Trade |evel : Maize seeds (in packige from), Rice all sorts, protein premix of janimal feed, Chemical fertilizer; Insecticides, Fungicides, Pesticides, Anti sprouting products, Plant growth regulator and disinfectants used in agricultural activities.INPUT TAX CREDIT MECHANISM : (section 9, tute 19) ‘Taxpayers are entitled to get input tax credit (rebate) on the VAT paid inputs (goods and service’) used for producing/ supplying the taxable goods or rendering the taxable services whether imported or locally procured. As a result the incidences of taxes are istributed among the all taxpayer in a same chain and the individual incidence becomes low. Input tax credit is an incentive to the tax payer. It is the engine of VAT system. It is a progressive tax system because of input (ay eredit faci @ INPUT TAX CREDIT: Input means— [Section 2(90) ] (a) All raw material, Laboratéry re-agent, Laboratory equipment, Laboratory accessories any Gas, any’ material used as fuel, packaging” material, services and machinery and spares excepting labor, land, building, office equipment and conveyance. (b)Incase of trading, goods ‘imported, purchased, achieved, or otherwise procured in view of sale, exchange or in other words handing over. st Contnued. Input tax means— ; [Section 2%gha)} Value Added Tax paid on imported! inputs by a registered person or purchased inputs by him from dther registered person and VAT deducted at source on imported in uts at the import stage shall also be included. What is Tax Credit or Rebate In accordance with the provision of section-9 of VAT Act and rule-19 of VAT Rules any registered manufacturer, service renderer, importer or trader of taxable goods or services may adjust the amount of input VAT paid earlier on his inputs against output VAT payable on goods or services. The scope or facilities, provided here is called Input Tax CreditfRebate. Input Tax Credit = Output Tax ~ Net Tax Payable 2Continued. Credit/ Rebate Mechanism: [Section 9, Rule 19) Input tax credit facility is a right for the tax payer. But it is mot free to exercise. This rebate can only be takes: under certain conditions. Tax credit {snot permissible in the following caset Input tax mentioned in the Bil of Entry or Tax invoice (VAT-11) in which the Registration No: does not belong to the Registration No. of the supplier of goods, t-ader or service renderer. VAT paid against the goods kept under others possession, right or supervision. The amount of SD or Turnover Tax paid earlier. The raw materials used in the production of goods or services exempted from VAT. VAT paid a time use. inst reusable packaging material, excepting the first AVAT paid on Goods and Services which are related to the construction. Modernization, expansion, renovation and repair of any building or establishmen’ and also purchase or repair of any kind of furniture, stationeries, air conditioner, fan, lighting equipment, generator ete, 28 Conti wed... VAT paid on rent or lease of Architectural Plan and Design, conveyances ete. VAT paid against expenditire of travel, entertainment, staff welfare and development activities. G VAT paid against such inputs which is not entered in the book of purchase (Mushak-16) preseriped by rules. D The amount of VAT concerned with bank guarantee under which the input is released, till the bank guarantee finally disposed of . If the value of inputs of goot's or services worth Tk. one lac or more and if the purchase price does not paid fully or partially through banking or electronic channel. GF Credit is to be taken within the same tax period, in case of failure it must be taken within 2 tax period provided the total inputs entered into the production, supply or service rendering place. | peeContinved.. How does the tax credi: / Rebate system work at different levels of a business supply chain ? [ Flow Char for Credit / Rebate Mechanism] China stibution Tevel ving |. | Import level Tn Justry level at cos |” |Vatuefor VAT 100k] —] Value fr VAT 1501] —— | Wale for VAT 180 Th. ‘Rate of VAT = 15% Rate of VAT = 15% Rateof VAT = 15% Toul VAT= 15k | | Total VAT'= 22.50 th Total VAT= 27.00 th. VAT paid ealue | | VAY Rebate= 15th, VAT Rebatew 2.50 th. ots th | Newat= 780 Net VAT = 4.50 th | Var patd value VAT paid value |= 17250 tk = 207 th ena Level Whole Sate Level {Consumer level Value for VAT 250 tk falue for VAT 210 th Total value= Racof VAT = 15% Rateof VAT = 15% 25043750 Tout VAT= 3750 th antl VAT = 3150 th = 287.50 tk. /AT Rebate= 31.50 th [AT Rebate= 27.00 th (VAT inclusive) ‘Ne:VAT » 600 th. Net VAT = 450th. VAT pi cae VAT paid value atl 241.50 th, Continuet... Exceptions and other relevant issues Partial Rebate : As per rule “9 of VAT Rules 1991 the following, percentages of rebate maj be taken in respect of place, installation or premises used in connection with production or supply of goods or rendering of services : QVAT paid on insurance, gas, pov'er distribution, telephone, tele- printer, fax, internet, freight for varders, C & F agent, WASA, audit sand accounting firm, procureme t provider, security serviee, legal advisor, transport contractor ard banking services : 80% GAdjustment of Rebate: Any taxpayer may adjust the amount of VAT shown in the Bill of Entry (B/E) or VAT Challanpatra (Mushak- 11) on the rebate column of Azcount Current Register (Mushak-18) after the goods entered into the lactory or business place.Contiaued.... Cancellation of Rebate and Eeeutive Appeal : | sosoe2.20244 | O If any taxpayer without hiving legal right of taking rebate avails tax rebate, the concern officer cancelling the taken rebate may order for adjustment with the account current register or tax return(Mus1ak-19). = The person aj VAT officer days. ieved by the ¢rder may submit a written objection to a F to the officer passing the order within 18 working ~ The officer shall give an oppo ‘tunity of being heard to dispose of the issue within 1S working days and the order Issued by the said officer shall be finale ea IMPORTANCE OF VALUATION UNDER VAT SYSTEM As the realization of VAT in Bangladesh is still dependent on ‘manufacturing level and the VAT is realizable on ad valorem basis, so if the correct Value is not deterinined, the actual revenue could not be realized. But whenever the real VAT system will be implemented at all stages of goods and services the question of value for VAT in Bangladesh may be dealt with relaxed approach. Value for VAT does not meair the actual value or sale value of a commodity or service. Actual v ilue or sale value is determined by the manufacturer or trader or mirket. Here the value stands for the purpose of assessment of VAT 1 different stages only. So the question of value for VAT in Banglade:h is very important, though it is not important for the countries where the ideal VAT system is introduced at al stages ike: import, manufacturing, trading and se rendering. O Provisions regarding determination of value for VAT and SD. are contained in section § and 7 of: VAT Act and rule 3, 3ka, 3kaka, 3kha of VAT Rules. As per the currint position of law the assessable value for VAT at different stages are {o be calculated as mentioned below : spContinued. Import stage: O Assessable value for VAT = ‘Assessable value for Customs Duty under section-25 or 25A of Customs ‘Act + Customs Duty + Regulatory Duty (if any) + Supplementary Duty (ifany) with other Duties and Taxes (if any), except AIT. Other duties and taxes means : Sofe Guard Duty (SGD), Coumter-veiling Duty (CVD), Anti Dumping Duty ‘ADD) etc. OCatculation of taxes is given below: Customs Duty (CD) and Regu atory Duty (RD) Flaton Value: Hfassessable value —is-_——100.00 if rate of CD is 25%, then amountofCD. is_——(25.00 ifrateofRO | is 05% then amount of RD is-_—(05.00 Contnued. [Assessable value for SDiz Assessable value for Customs Duty + Customs Duty + Regulatory Duty (if any). a Supplementary Duty (SD) Basedon: Ifassessable value is 100.00 Values CD _Ifrrate of CD is 25% If rate of RD is 5% andifrateofSD is 20% Then amount of SD (100+25+5) x 20% = 26.00 [ie, Assessable value for SI 130.00 ] 10Continued. Calculation of Taxes Value Added Tax (VAT) at Import stage : Based on Hassessabe value is 100.00 Value+CD+RD+SD If rate of CL! is 25% Irate of RL is 5% Irate of SC is 20% & rate of VAT is 15% Then amount of VAT is = (100+25+5+26) X rate of VAT 15% = 23.40 Iie, Assessable value for VAT=156.00] co Continued. O Local stage: Value of goods i determined by aggrega‘ing the cst of inputs, other costs & charges, profit and commissions. Goods (Manufacturing): |(Value of Inpu's + Total Expenses + Commision, Charge, Fee ifany)'s aM Duis and aves (iam) Excepting VAs Prof) = * Supplementary Duty (itany)|- Calculation of Taxes, Value of Inputs 156.00 +#30.00 $4.00 320.00 210.00 Supplementary Duty @20% 42.00 Value for VAT =210.00+42.00 = 252.00 So the amount of VAT=(252x 15%)= 37.80 [Assessable value for SD: ‘The amount or consideration received or recei the buyer excluding the amount of SD and VAT. 1Con nu Services Value for Ser: Total receipts excluding VAT, Lut including supplementary duty (if any) | * Total receipt_means~ Total money received or receivable including commission or ¢) ‘excepting VAT by the taxable service renderer in exchange of his services. [Section 26h] Assessable value for SD: Total receipt excluding the amount of SD and ATI ® Calculation of Taxes : Value of services 138.00 Value for VAT 120.00 Value for SD = 100.00 So Total Money received or rézeivable = 100.00 [Amount of SD @ 20% = 20.00 ry éonunued. ‘Trade ( Whole sale and reta'l level ): Local Trader : 0, valus for VAT :[{Purchaso value + 26.67% [o,f80t on 26.67 (amount of value addition). [A Value to be declared under section 5(2) wth the “form-tkha" (rule 3) to {Be dvlelonalOftcor cf VAP for eupply of goods and tare (9 be bald The rate of value addi ion for pharmaceutical and petroleum ‘Substances will be countac! 9s 13.33% and 2% VAT will be Calculated fm the total value of the sur plies, in case of payment on the basis of truncated base, no rebate can be claimed. The small retail traders whe se annual turnover ie not aver tk. 70 lac they can pay fixed amount ct VAT region wise on tho baste of cortain amount of value addition determined by NBR Rate of value addition is determined to be 26.67%, ie. net 4% on the sale amount is payable. But one can pty VAT at the rate of 15% on actual basis declaring value and maintaining re juired Registers and formalities [according toideal VAT system. In that case, vat Purchase value * 18 ale value * 15%. 12Commercial Trader : Continued... U Advanced Trade VAT (ATV) [((Customs assessable value + Customs duty) + Regulatory Duty (if any) + SD (if any)}+ 26.67% (Value Adkition)}* 4%. Value to be declared under secti»n 5(2) with the “form-1kha” (rule 3) to the divisional Officer of VAT for thy next supply and taxes to be paid @ 15%. Calculation of Taxes Based on Value 2g6gy if assessable value is 100.00 +CD+ RD +SD +. cD is 25% (Value addition) RD Is 5% sD is 20% vaT is 15% AT is 5% ATV is 4% The amount of ATV is = (100+25+5+26+41.60) X rate of ATV 4% = 197.60X rate of ATV 4% =7.90 5 Continued. EXCEPTIONS : O Production on contractual basis — {[SectionS(2ka)] NBR may by rule ascertain the procedure of valuation incase of manufacturing the brand govds of a registered manufacturer on contract basis by another registred manufacturer. The manuf rer of the giods (sub-contractor) will submit a value in form “Musl ak-1" to the Divisional Officer of VAT jon/charges against each unit of goods he will receive from the owner of the brand goods. The owner of the brand geods will also submit a value declaration in form “Mushak-1” to the Divisional Officer of VAT as per normal procedure laid down in rule 3(1) of VAT rule. The manufacturer of the goods (sub-contractor) shall only be entitled to supply the manufactured goods to the registered premise of the owner of thit brand goods. At the time of supply he Will issue a “Mushak-11” using double sided earbon destined to the premise of the owner. 13‘ontinued. Supply against in-different value— ——_{Seaion 52a), rte 3k! Both the Manufacturer and Impotter can opt for supply against indifferent value. Option to sale with printed in-different value through out the country Manufacturer will have to pay in total at the factory level and importer will have (o pay in total ath s supply level. Prior approval from NBR is to be taken © Back Calculation Method — [Section 5(2ga Whatever the provisions previ in section 5(2), in view of maintaining stable price for goods and scrvices if the Government through any Govt. office or other organizétion determine unit price of such goods or services then at the level of production or service rendering the payable total SD and VAT siall be realizable on the basis of back calculation from the determingd price. In the above ease Govt. ma: by notification in the official gazette exempt from the responsibility of value declaration under some terms and condition mentioned in th gazette. (Rule 3kaka) ' ca Continued. For Retail Price at Production Level — [Section 5(3)] QGovt. may by notification in the official gazette determine the goods o which VAT will be applicable on the basis of retail price. OThe retail price of the goods shall be the price determined by the manufacture on approval from the concerned officer in which all expenses, commission, charges, duties and taxes are included. and The goods with special brand and marks sold at the price to the general corsumer and the price is clearly, remarkably and indelibly printed on to the goods or its package, bag or cell: 14Continued... © Trade (Whole sale and retail) level: {Section 5(2)] NBR by notification in the official gazette may fix the “rate and amount of vaiue addition” of any goods or class of goods at trade level. © For Services — {Section 5(4)] NBR may by order fix the a:tual value addition of any services or by notification in the offi-ial gazette fix the value added tax on the basis of determined value addition. Govt. may by notification in the official gazette fix a minimum value added tax on any service, in spite the service renderer provides that service free of cost. 0 TRUNCATED BASE SYSTEM FOR SERVICES Truncated base value for services were introduced to — protect the interest of got, revenue, ~ protect the interest of the taxpayers who add low value to their the items for which input eredit system does not work properly and exist major evasion r sks, ~ the items for which easier and simple documentation and tax payment system is essential D__NBR may by order fix VA‘T on the basis of real value addition or by SRO in the official gaz-tte fly VAT on the basis of determined rate of value addition of certain services. {Section 5(4)] 15Contjaued, Truncated base and net VAT rate of some service items G National Board Revenue SRO No. 182-Law/2012/640-VAT, Dated: 7 June, 2012. Determir ion of tix on the basis of value addition at certain rate in case of specifie serices rules, 2012. Service ase of Partice ar Rate of Value Addi Newar Provider Rate wo __ @ @ ‘Restaurant | 100% of the amount yeeived against the Service 15% provided by air cenditioned restaurants 40% of the amount rd:cived against the service 6% provided by orn ry (noe airconditioned) restaurans ‘Motor Car | 30%oF the total amount received against servicing and | 4.5% Garage & |” repaicing ofa motyr vehicle along with te value of Workshop | the machinery any, machinery parts used bythe service provider ‘Service Provider | __ are of Particulate of Value A o @ Dockyard | 309G0f the vial ame nt roveived instead of 45% servicing and repairigg ofa marine vehicle along With the value of the faachinery and machinery pars added to that vlc bythe serve provider Construction | 36.6796 the value tentoned inthe ender for 35% Firm | any particular const tion work. t Tand Developer | (a) 10% ofthe total diaount received instead of 13% Building sales or handover »fdeveloped land Construction | (b) 10% ofthe total gnount received instead of | Fim sales or handover »Pbuilding 13% Photo Maker | 30% Of the total anol ut received bythe photo 15% maker umitue Sales | (@40% ofthe total aniount received at production [66 Centre| stage (b) 26.67%oFthe {wal amount received, at sales | 49% stage (on the condito of having the payment receipt of VAT a the! ate of 6%, at production st2g0) Ae 16‘Service Provider | Base of Particular ate of Value Addition Net VAT Rate o @ @ Goldsmith, | 13.3390 the total a nount reesved instead of 2% Silversmith, — | sales of gol, gold jewelery, silver or silver Jewelers" | jewellery & Guides ‘ir conditioned | 66.67%%0f the total & noun eecived by the 10% Bus Service | service provider ‘Air conditioned | 66.67% the total q noun ressived by the 10% Launch Service_| sevice provider ‘Air conditioned | 66.67% the total a nount received by the 10% Train Service _| service provider Procurement | 26,67%of th total value ofthe product or % Provider | service supplied bythe procurement provider or ofthe value mention din the tender “Transpo | (a) 15%of the total emount of value Gn appicable 225% Contrasor | eases, the value mentioned inthe tender) teceived bythe sevice provider engaged in transporting petro eum products (©) 30% of the otal mount of value (inapplicable 45% ass, the value montioned in the tender) receive bythe sevice provider engaged in is teanspoting othe products Service Provider | Base of Particular Rate of Value Addition | Net VAT Rate oo. @ @ Power Supplien: | 33.34%¢of the worl ele ity Bil received agains the 5 sage of electricity Buyer of Auctioned | 2667%of the sales valte ofthe auctioned goods % goods i Tniaration | 30% ofthe total anu received instead ofthe sevice 4% Consultant | provided by the servic provider English Mediam | 30% ofthe total amoun received instead ofthe service 4% School __| provide by the servi provider Space or Installation | 60% ofthe total moun fret in ease of Space and ry Rent taker | stucture rent ‘Sales Centre of RMG | 39.3496 the toll amjun recived at ales sage we with Own Brand Taformation | 30%GoF the total amour, received bythe service provider 45% Technology Enabled Services Ag? Bo 17cortinued... Q VAT will be applicable at the rate of 15% in the cases of those taxable services which are not mentioned in this aforesaid table. OO The VAT determined in the column (3) of the aforesaid table will be paid by the service 2roviders. O In case of the aforesaid sprvice providers shown in column (1), no input tax credit will 2e allowed. O If any service provider wants to pay VAT at the rate of 18% on the total received amotint, taking credit, s/he will be able to do that complying with the applicable terms and conditions of VAT Act and VAT Rules. 8 TARIFF VALUE FOR GOODS Tariff Value - [ection SO) NBR by notifications in the official zazette may fix the Tariff Value for SD and VAT in case of goods of services considering the importance of public interest and being satisfied after due enquiry ‘Tariff Value for goods were introduced to— ——_[Seetlon 5/7, $4) ® protect the interest of govt. revéaue, protect the interest of the taxpay ers who add low value to their goodsiservices, the items for which input eredit system does not work properly and exist major evasion risks, = the items for which easier and simple documentation and tax Abie 18Contin. National Board of Revenue General Order No-23/VAT/2013, Dated: 06 June, 2013, Some examples of tariff value: Purified Soya bin oil Tk. 4110MT Purified Palm oi Tk. 3700/MT Pickle (Bottled) Tk. SO/KG Pickle (Packed) Tk. 60/KG ‘Tomato Paste Tk 15/KG Mango Juice Tk. 15/KG pack Newsprint ‘Tk. 100000/MT ‘The tariff value is fixed only “or the purpose of assessment and realization of VAT, it is not a mirket price or real price or total cost of the goods. It may be the vale or amount equal or nearer to the amount of value addition or hcw much relax treatment the policy maker wants (0 consider for'a certain sector or item. It is a distortion to the VAT system, but the government of Bangladesh has under taken this system on inter m basis to address the trade reality Value declaration and approval procedure rule 37 Value declaration with input ~ output co-efficient in Form “Mushak-1” to the Divisional Officer of VAT G Goods may be supplied from tilxt day on the declared value Gn case of any change in value, itis to be noticed to the Divisional Officer before seven working diys of its execution O If any anomalies are found in the value declaration afte Divisional Officer may by giving an opportunity of hearing can review the value and execute it from the date of declaration O The decision of the Divisional Officer regarding the value within 15 working days On request of registered person or Divisional Officer or of his own initiative, Commissioner can fis the assessable value due to increase or decrease of market price or of cther reason. GA registered person may apply to the Commissioner to review the value assessed/imposed by the j)ivisional Officer at a higher level and Comi in 18 working days. : 7 19Coninued. 1 A declaration regarding inpiit-output co-efficient of every goods form “Mushak-1ka” to b¢ submitted to the Divisional Officer of VAT in case of goods under Tariff Value and in form “Mushak-kha” in case of tr.der or commercial importer. his value declaration Cl Any manufacturer may voluatarily sub in form “Mushak-Igha” in. case the retail sale price is clearly, remarkably and indelibly rinted on to the package of the produced goods. But in such case VAT imposable value at the production level should not de lower than two third (2/3) of the retail sale price. In this regard the package of the goods printed with the retail sale price to be submitted with form "Mushak- Igha" and to be effective oa the day of declaration subject to approved by the Division officer. 7° Continued... Role of “value review committee” formed by NBR. Pate 307) Commitee: Director General VAT Audit, Intelligence and Investigation is the President "and a member (Additional Commissioner/Joint Commissioner) from evety VAT Commissionerate and VAT Wing (Birst Secretary). NBR, any VAT Commissioner or registered taxpayer may proceed to the committee and commit'ee may give suggestions after review. Practical Problem in Value declaration Fluctuation of value sf inputs and currency rate Complication in aetual distribution of input-output co-efficient Peoblem of adjustment with the market price and instability in siness system Inadequate skilled a1 d efficient person power May create inconsistency between business flow and system Less accommodative approach towards reverse interest ooo ooo Aka pen 20