(i) VAT is imposed on goods and services at import stage, manufacturing, wholesale and retails

levels;

(ii) A uniform VAT rate of 15 percent is applicable for both goods and services;

(iii) 15 percent VAT is applicable for all business or industrial units with an annual turnover of
Taka 2 million and above;

(iv) Turnover tax at the rate of 4 percent is leviable where annual turnover is less than Taka 2
million;

(v) VAT is applicable to all domestic products and services with some exemptions;

(vi) VAT is payable at the time of supply of goods and services;

(vii) Tax paid on inputs is creditable/ adjustable against output tax;

(viii) Export is exempt;

(ix)  Cottage industries (defined as a unit with an annual turnover of less than Taka 2 million and
with a capital machinery valued up to Taka 3, 00,000) are exempt from VAT;

(x)  Tax returns are to be submitted on monthly or quarterly or half yearly basis as notified by the
Government.

(xi)  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/Local   Stage: a)     Goods (manufacturing): [Production cost + Profit
and   Commission (if any) + Supplementary duty (if any)]

b)     Services: [total receipts excluding VAT but including 

supplementary duty (if any)]

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 non availability of
invoices from the sellers of input. In order to remove this operational difficulty fixed bases such
as 10%, 25%, 30%, and 60% value addition is taken into account for calculation of VATfor a
number of goods and services. In such circumstances net VAT ratefor 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 a special
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 an advance trade VAT.

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-rollable scraps is TK 4000.00 per MT.
Normal VAT input credit is also not available under this system.

Deduction of VAT at source:  As deduction at source is also practiced in case of VAT on 
certain services, Government, Semi-Government, Autonomous Bodies, NGOs, Banks, Insurance
Companies and Limited Companies are authorized by the government to deduct applicable VAT
on the services at source.

Excise Duty: At present excise duty applies to only two items: bank deposits and domestic air
ticket (Tk. 250 per journey).