Basic Features of Value

Added Tax (VAT) for

ITES
Speakers Profile

Md. Hafijur Rahman

FCGA, CA (AS), M. Com
(DU)

Managing Partner,
Global VAT Alliance

General Secretary,
Bangladesh VAT Bar
Association
CONTENT
Session-1 Introduction of New VAT Law in BD
Session-2 VAT registration
Session-3 Imposition of VAT, VAT Rate, Exemptions, Manner of VAT collection
Session-4 VAT deduction at source, deposit & compliance
Accounting of VAT -Turnover Tax and Maintenance of Forms, notice,
Session-5 records & Reporting, Use of Software, EFD, POS
Session-6 Review of Day 1 Discussion
Session-7 Input Tax (VAT) Credit
Assessment of Net Payable VAT & VAT Determination by the
Session-8 Commissioner- VAT
Session-9 VAT Return
Session-10 VAT Authority, Audit and Inspection
Session-11 Recovery of Arrear VAT & Refund
Session-12 Offence, Trial, Punishment & Appeal, Revision etc.
 WELCOME TO VAT SESSION
Session-1: Introduction of New VAT Law in Bangladesh

Title of the new VAT Law: Value Added Tax and Supplementary Duty Act, 2012
Value Added Tax and Supplementary Duty Rule, 2016
Effective from 1 July 2019
 
New VAT law covers VAT, SD & TT as well Features VAT Legislation is comprised of:
• Online Registration • VAT Act
• Online Return Submission • VAT Rules
• Online tax payment/E-Payment system • Finance Act
• No VAT Current Account • SROs
• Software Accounting & EFD • Orders, Explanations
• No price declaration

VAT Act VAT Act VAT Rules Forms SROs GO

Sections Schedules

139 (73) 3 (3) 95 (38) (29)

VAT Schedule
First Schedule Second Schedule Third Schedule
VAT exempted Goods & Goods and Services subject to
Supplementary Duty (SD)
Services VAT
Part-1 SD-Goods: Import
1st Part Exempted Goods  
Stage
Part-2 SD-Goods: Delivery
2nd Part Exempted Services  
Stage
Part-3 SD-Service: Delivery
   
Stage
Registration mandatory Registration mandatory Registration mandatory
Fully exempted- no VAT SD imposed at higher rate VAT imposed
No need to maintain VAT
Shall maintain VAT Books Shall maintain VAT Books
Books
Return submission mandatory Return submission mandatory Return submission mandatory
What is VAT?
VAT is one kind of tax on value-addition /added to a product/service which is collected at
every stage of production and / or distribution, ultimately passed on to the consumer.
Though the taxpayers do not feel any extra burden for this tax because this tax is paid with
the transaction value. Due to imposition of VAT the price of goods or services increased.
 

What does tax mean?

Under the new VAT & SD Act [sec. 2 (24)] tax means and includes-
 VAT,
 Turnover Tax,
 Supplementary Duty, and
 interest, fine, penalty for recovery of arrear money
N.B. Excise duty as well.
 ITES service as per VAT LAW
Who is liable for VAT registration?
 Annual turnover exceeds registration threshold (Tk. 3 crore or more];
 Annual estimated turnover to be exceeded registration threshold (Tk. 3 crore or more];

Registration Irrespective of threshold turnover:

 SD imposable goods or services the person who engage in any supply, manufacture or import in
BD.;
 Suppliers who participates in tender;
 Engage in import-export business;
 Any other economic activity determined by the Board.
[Ref: New VAT & SD Act, sec. 4]
A BIN or registration number contains Nine –digit in form 2.3
[Sample BIN…..]
BIN containing 13-digit in place of 11 / 9-digit has been introduced recently. First 9-digit is the ‘business
identification number’, then hyphen, then 4-digit jurisdictional ID number is related to business address.
Once business address is changed the 4-digit number shall be changed. There shall be a hyphen in between 9-
digit and 4-digit.
 Session-2: VAT registration [u/s 4 to 14 & Rule 3 to 15
Information Technology Enabled Services (ITES) means
• Digital Content Development and Management;
• Animation (Both 2D and 3D);
• Geographic Information Services (GIS);
• IT Support and Software Maintenance Services;
• Software Development and Customization;
• Website Development and Services;
• Website Hosting, Digital Data Analytics;
• Business Process Outsourcing;
• Data Entry, Data Processing;
• Call Centre;
• Digital Graphics Design and Computer
Aided Design;
• Search Engine Optimization;
• Web Listing;
• Document Conversion;
• Imaging and Archiving;
• Overseas Medical Transcription;
• Cyber Security Services; and
• E-Procurement and E-Auction
Uses of 13-digit BIN

Online return submission & tax payment;

Commercial banks cannot be issue L/C, & cannot provide banking

services;

Activities under Asicuda System of Custom Station cannot be

performed;

Cannot participate in tender, quotation etc;

 Voluntary Registration- u/s 8

Any person
Concerned VAT
1. irrespective of
registration threshold
2. Officers register the 3. Before 1-year of the
registration the
person though issuing person shall not be
can be applied for
a BIN allow to apply for
registration
voluntarily to the cancellation of
concerned VAT registration
Officers
Persons required to be enlisted and their enlistment [u/s 10]
Persons carrying on an economic activity, exceeds the enlistment
threshold, but does not exceed the regn threshold i.e. Tk. 50 lac to Tk.
3 cr. (u/s. 2, s.s. 48);
Uses of Business Identification Number (BIN)-Rule 11
 Any imports-exports;
 Regn of land/building;
 Obtaining IRC/ERC;
 Manufacturing of goods
 Any supply to withholding entity;
 Participates in any tender;
 Enlistment in any organization;
 Approval of Bond License;
 Approval of bank loan;
 In any other cases determined by the Board
SESSION-3:
Who is liable to pay VAT? How to impose & payable VAT?
1. Importer VAT shall be imposed on the value
2. Supplier of taxable import & taxable
3. Supply Receiver supplies applying the prevailing
4. Auctioneer tax rate [@ 15%].
[Ref: New VAT & SD Act, sec. 16] [Ref: New VAT & SD Act, sec. 15]

Treasury code 13 digit

• VAT 1/1133/0000/0311
• SD [service] 1/1133/0000/0711
• TT 1/1133/0000/0313
• Excise Duty 1/1133/0000/0601
• Penalty 1/1133/0000/1901
[0000 represents code no. for the respective Commissionarate]
 Value base of taxable imported items for VAT [u/s 28]
Base Value of any Taxable Import shall be:
• For charging import duty the value of goods shall be determined as per Customs Act;
and
• If applicable, duty(s) payable on Imported goods: CD, SD, & Other duty & taxes
(Excepttax
Advance advance tax &&advance
[AT] paid income
adjustment tax)
at import stage [31]
• Every person shall pay payable tax in advance for supply of imported goods;
• Advance tax shall be @ 5% on the base value of Import for VAT purpose;
• Can accept decreasing adjustment in the return for the said tax period;
• An unregistered person can demand refund of Adv tax from the Commissioner; and
• Upon receiving of refund application the Commissioner will settle AT in the prescribed
method.
Determination of value of taxable supply – [u/s 32]
• Consideration for such supply, reduced by an amount equal to the tax fraction of that
consideration;
• For imported service, value arrived at (i) above or at fair market price;
• Regd person & Associates: Fair market value minus tax fraction;
• Without consideration for such supply, reduced by an amount equal to the tax fraction of
VAT payable time for taxable supplies?
From the following activity (s) which occurs first:
 Making delivery;
 Issuing invoice;
 Receiving goods in part or full;
 Delivered for personal use.
[Ref: New VAT & SD Act, sec. 33]

Lease of Place and Establishment (S074.00)

 Factory rent of the registered manufacturer are exempted from VAT;
 Rent for wholly residential purpose and up to 150 sft rent for commercial purpose are
exempted from VAT;
 Registered ITES organization under code (S099.10) office rent paid are fully exempted
from VAT;
 Rent of showroom
Declaration of Input-Output
owned andcoefficient-
managed byu/s.female
32 (5)promoter are exempted from VAT.
 Every registered person before delivery or production of any goods shall submit declaration in
Form 4.3 to the DO and the DO shall transmit a copy of the same to the Commissioner within
7 working days.
Object of Input-Output coefficient 
For determination of taxability and effective audit of the registered person.

Effect of Input not included in Input-Output coefficient

 Input tax paid but that input not included in Input-Output coefficient. Input Tax Credit shall
not be entitled.
[Ref: New VAT & SD Act, sec. 46 (1)(da)]
Penalty for not submitting Input-Output coefficient
Failure to submit Input-Output coefficient within the prescribed time, penalty Tk 10000.
[Ref: New VAT & SD Act, sec. 85 (1)(Cha)]
 Three Schedules under new VAT law
Part/
Schedule Subject matter Rate U/s.
Table
  VAT exempted Goods & Services Zero 26
First 1st Part VAT exempted Goods Zero  
2nd Part VAT exempted Services Zero  
Table-1: Supplementary Duty (SD)   55
Part-1 SD-Goods: Import Stage    
Second
Part-2 SD-Goods: Delivery Stage    
Part-3 SD-Service: Delivery Stage    
  Goods and Services subject to VAT   15
Table-1
  Goods subject to VAT 5%  
  Services subject to VAT 5%  
Table-2
Part-1 Goods subject to VAT 7.50%  
Part-2 Services subject to VAT 7.50%  
Third Table-3
Part-1 Goods subject to VAT 10%  
Part-2 Services subject to VAT 10%  
Table-4
Fixed
Part-1 Goods subject to VAT  
amount
Fixed
Part-2 Services subject to VAT  
amount
Exemption under First Schedule
VS
Exemption under SROs

Basic Exemption SRO

VS
Other Exemption SROs
TAX RATES
Standard Rate 15% [u/s. 15 (3) ….]
Reduced Rates 5% to 10% [3rd Schedule]
Fixed Amount Tk. 4 to Tk. 2,000 [3rd Schedule]
Local Traders 5% [3rd Schedule]
Medicine Traders 2.40% [3rd Schedule]
Petroleum Products 2% [3rd Schedule]
Land Dev Org 2% [3rd Schedule]
Building Construction 4.50% [3rd Schedule]
[3rd Schedule]

Re-registration 2%

Zero Rates 0% [1st Schedule]

Zero Rates 0% [SROs]
Zero Rates 0% [u/s. 23]
Advance Tax 5% [u/s. 31 (2)]
Turnover Tax 4% [u/s. 63]
SESSION-5

VAT Deduction at Source

SRO #187-Aain/2019/44-VAT dated 13-06-2019 & SRO # 235-
Aain/2019/71-VAT dated 30-06-2019
Effective date is 1-7-2019
VDS authority
VAT deducting authority means and includes
- Any Ministry, Division or Directorate;
- Semi-Govt or autonomous body;
- Govt enterprise, Local authority, or
- Any NGO registered under NGO Affairs Bureau or Social
Welfare;
- Any bank, insurance or financial institutions;
- Any educational institutions not below post secondary
education level; or
- Any limited company.
 VAT shall be deducted at source in the following cases:
1.  For every regd supplier through tender/work order except exempted/zero rated
goods/supply VDS is applicable.
a. For supplier using Invoice in Form 6.3 of 15% VAT applicable no VDS is
applicable;
b. Full amount of VDS shall be deducted from the supplier at applicable reduced
rate & specific amount using Invoice in Form 6.3.
2. For receiving services outside Bangladesh and if any bank or financial institutions
are engaged in settling payment thereof, are liable to collect total VAT at source at
applicable rate.
3. For purchasing any at source VAT deductible service and payment settled through
bank, in this case bank is liable to deduct VAT at source at applicable rate in favour
of the purchaser and depositing the same to the govt treasury accordingly.
4. For granting any license, registration, revenue sharing, royalty, commission, charge,
fee or renewal by the govt or local authority to any person in exchange of money or
 Responsibility of the VDS deducting persons
1.  If the supplier does not issue ‘Consolidated Invoice and VDS Certificate’, then the
VAT deducting authority will not receive any supply and shall stop payment.
2. VDS authority/supply receiver shall deposit the deducted VAT within 15 days in
appropriate code and shall issue a certificate in Form 6.6 of 3-sets of which 1 st copy
VAT Circle Office, 2nd copy supplier and 3rd copy for deducting authority to be
preserved for 5-years.
3. VAT deducting authority can adjust the deducted money as increasing adjustment in
the return
4. Treasury code for deposit of deducted VAT is 1 / 1133 / Commissionarate Code /
0311.
5. Rules for preparation of TR challan:
• Col.-1: Name and Address of the person depositing VAT Name and Address of
the deducting authority, BIN, Circle, & Commissionarate.
• Col.-2: Name and Address of the Supplier in favour of whom VAT deposited
including VAT Circle & Commissionarate.
Responsibility of Suppliers
• The supplier shall issue Invoice in form 6.3
• In return form 9.1, part-3 value and VAT shall be mentioned
• Subject receiving VDS certificate in form 6.6 took decreasing adjustment with tax
period or within 6 months following the tax period after the time passed it will be
revocked.
Penalty interest etc

• For deduction of VAT the deducting authority and the supplier will individually and
jointly be liable for VDS and deposit the same to the treasury.
• Being responsible for deduction of VAT but fail to do, payable VAT along with
interest @ 2% on half-yearly shall be collected in such a way that the person/
authority is the supplier of goods or services.
• VAT deducted and being responsible for depositing in the treasury in time but failed
to do so, the Commissioner-VAT shall impose penalty up to Tk. 25,000/- to the
person responsible [u/s. 85 (1-ka).
• Both the supplier and the receiver shall be liable failing to not deducting &
 Misc
 For supplying imported goods Advance tax (AT) shall be collected at import stage.
Such AT shall be adjusted (decreasing) with the Return, part-6.
 For the centrally registered organization, the branches/sales offices can be deposited
their VDS centrally.
 Procurement provider means any person, association of person or an organization
who collects in exchange of consideration of any goods or services (Apart from
items of First schedule or exempted supply) from the importer, producer, trader or
service provider excluding the producer/manufacturer, trader or service provider by
way of tender, quotation or any other way and supply to the prescribed VAT
deducting authority only.
 Clearly defined services cannot be treated as procurement provider.
 In case of multiple elements of cost there could be complexity. In this case separate
elements shall be segregated in the tender, quotation or bill of supplies mentioning
prices element wise applying VAT rates thereon.
 In case of contract signed under 1991 VAT Act but subsequently a part of the
 SESSION-4 Books, Records & Documents

‘Tax Invoice’ U/s 51 Rule 40 (ga)

Procedures for issunce of Tax Invoice-

1. For each supply ‘Invoice’ shall be issued using
Form 6.3;
2. Actual time & date of ‘Invoice’;
3. Name, address and BIN of supplier;
4. Name, address and BIN of buyer exceeding
value of supply Tk. 25,000;
5. Description, quantity, actual time & date of
goods supplied;
6. Value of supply excluding VAT;
7. Applicable VAT rate on supply;
1. Amount of payable VAT;
2. Sum of the Value of supply and payable VAT;
3. Fiscal year wise serial number of ‘Tax Invoice’;
4. Separate serial number of ‘Tax Invoice’ for each
locations if the regd person supply goods from
different locations;
5. At least 2 copies of Invoice shall be issued of
which original copy to the buyer and 2nd copy
shall be preserved by the regd person;
6. In case of VAT deducted at source against supply
‘Tax Invoice’ shall be treated as ‘Integrated Tax
Invoice & Certificate of VAT Deducted at
Source’;
7. Any other information as determined by the