A value-added tax or value-added tax (VAT) is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price, whereas, from the seller‘s point of view, it is a tax only on the “value-added” to a product, material or service, at the stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts and retains the rest for themselves to offset the taxes they had previously paid on the inputs. The “value-added” to a product by a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs. A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. The trade law practice at PORTFOLIO, as a law firm in Dhaka, Bangladesh, has always been a standard in its scope, as PORTFOLIO helped companies around the world to meet their trade policy and dispute resolution needs in Bangladesh.
- VAT registration with mushak-2.1;
- Input-Output Coefficient with mushak –4.3;
- Control central registration challan with mushak –6.5;
- Registration place change by mushak-9;
- Control mushak -6.2, 6.2.1;
- Submissions of VAT return with mushak-9.1;
- Submissions of turnover tax return with mushak-9.2;
- Clerical mistake and error;
- Face with tax audit;
- VAT exemption as per 1st schedule and 2nd schedule;
- Drawback as per VAT act-2012;
- Appeal against the order of VAT recovery officer;
- Refund on the basis of order in appeal;
- Others (as per value-added tax act-2012);
List of major VAT forms:
PORTFOLIO offers the above services as per VAT act 2012 & rules 2016. The need for legal and administrative reform of the existing taxation system has been felt by many stakeholders. The new VAT and SD Act was a major reform agenda for the government.
Coverage of VAT
VAT & SD Act 2012 provides VAT exemption on certain goods and services through the First Schedule of the legislation as well as specific exemptions through statutory orders.
The VAT & SD Act 2012 provides VAT exemption on certain services as per the first schedule of the legislation which is broadly categorized as follows:
i) Basic services for livelihood – agricultural services e.g. farming, irrigation of farmlands, storage of agricultural goods and animal products excluding warehouses, etc.
ii) Social services – e.g. Government and private healthcare services, Government education services, etc.
iii) Cultural services – g. radio or television broadcasting, publication, and sale of books, magazines, newspapers, and Government Gazette.
iv) Financial services – stock or security exchange institution, life insurance policy and deposit or savings at banks or financial institutions, activities related to the settlement of purchase and sales of
v) Transportation services – e.g. passenger transport, goods transport, airlines, ambulance services except for certain cases such as shipping agent, courier services, freight forwarder, charterer of aircraft or helicopter, Air-ambulances related services, etc.
vi) Personal services – e.g. journalist, actor, singer, driver, operator, designer,
vii) Other services – g. services for any religious activity or programs, land purchase or transfer and its registration, stevedoring activities, etc.
i) Supply of zero-rated goods
- Supply of any goods from inside to outside Bangladesh,
- Temporarily imported goods,
- Deemed export,
- Supply of goods for repair, maintenance, or modification and supply of stores or spare parts for ocean-going ships and aircraft engaged in international transport.
Deemed exports are supplies of ingredients for goods or services for consumption outside Bangladesh and supply of any goods or services within the territory of Bangladesh against foreign currency through an international tender or under the local letter of credit.
ii) Supply of zero-rated services
- Services have given physically on goods situated outside Bangladesh at the time of supply of the service,
- Services have given relating to temporarily imported goods under the Customs Act,
- Services are given to a recipient situated outside Bangladesh at the time of supply,
- Supply of telecommunication services by a telco supplier to a non-resident telco
i) VAT Payment through VAT Return
Registered persons under VAT & SD Act 2012 are required to pay their net VAT payables if any, (i.e. output VAT less input VAT and other adjustments) at the time of submission of VAT Return within 15 days following the month-end. The following equation will be used for the calculation of VAT liability:
|+||Supplementary Duty, where applicable|
|–||Input VAT Credit|
|=||Net Tax Payable|
ii) Input-Output Coefficient Declaration
Registered and enlisted persons are required to file Input-Output Coefficient Declaration in Mushak Form 4.3. before the supply of goods and supply. Subsequently, a copy of the Input-Output Coefficient Declaration should be sent to the concerned commissioner’s office within 15 days by the Deputy Commissioner of Tax (DCT) along with his/her recommendation.
The Input-Output Coefficient Declaration will not be applicable for 100% export-oriented organizations for its exportable goods.
The following increasing adjustments can be made against output VAT and Supplementary Duty payable in a tax period, subject to fulfillment of specific conditions, time limit, and method namely:
- an increasing adjustment in respect of withholding tax;
- an increasing adjustment required for an annual re-calculation;
- an increasing adjustment if payment is not made through banking channels;
- an increasing adjustment for goods put into private use;
- an increasing adjustment on being registered;
- an increasing adjustment on cancellation of registration;
- an increasing adjustment for a change in the VAT rate;
- an increasing adjustment for the payment of any interest, monetary penalty, fine, fee, etc; or
- any other prescribed increasing
The following decreasing adjustments can be made against output VAT and Supplementary Duty payable in a tax period, subject-specific conditions, time limit, and method namely:
- a decreasing adjustment for the money paid as advance tax;
- a decreasing adjustment in respect of withholding VAT against supply by the. Supplier;
- a decreasing adjustment applicable as a result of an annual re-calculation;
- a decreasing adjustment for issuing credit note;
- a decreasing adjustment of paying input VAT for export;
- a decreasing adjustment where there is a decrease in the VAT rate;
- a decreasing adjustment claimed for a negative net amount carried forward from a previous tax period;
- a decreasing adjustment allowed for VAT overpaid in a previous tax period; or
- any other prescribed decreasing
iv) Input VAT Credit
A registered person shall be entitled to an input VAT credit for any taxable import or taxable supply made to the person for conducting their economic activities and taxable supplies.
VAT & SD Act 2012 restricts to input VAT credit on the following cases, namely:
- expenses for exempted goods or services,
- expenses that are not mentioned in the Input-Output Coefficient Declaration,
- expenses related to supply of goods and services which are subject to Turnover Tax (VAT), VAT at a specified rate of VAT at a rate less than 15%,
- expenses over Tk. 100,000 for which payment is made without banking channel,
- imported services for which output VAT has not been shown in the VAT Return,
- the claim of input VAT credits which have not been made either in the VAT period in which VAT has been paid or within the four succeeding VAT periods,
- expenses for which the VAT invoice (Mushak Form 3) does not mention the name, address, and BIN of both the purchaser and seller,
- purchase of passenger vehicle or entertainment services provided that, input VAT credit may be allowed when such purchases are part of the normal course of the economic activities of the person (e.g. dealer or charterer of vehicles),
- purchase of transportation services,
- VAT paid on the goods under the custody or possession or occupancy of another person,
- VAT paid on inputs that have not been entered into the Purchase Register or Combined Purchase and Sale Register prescribed by the Rules,
- An additional input tax credit will not be allowed if a revised Input-Output Co-efficient Declaration is not submitted to the concerned VAT authority in case of a change in the price of the input by 5%. Earlier, this condition was only mentioned in the form of an input-output co-efficient sheet. Now, it is embedded in the law, and
- In case of the input tax credit for the input of Gas, Water, Electricity, and Telephone bill, the invoice raised by the organization will be considered as tax
iv) Partial Input Tax
If a registered person is not entitled to full input VAT credit, their entitlement to input VAT credit against total imports and acquisitions shall be calculated in a proportionate manner as follows:
I × T/A
“I” is the total amount of input tax originating from imports or acquisitions; “T” is the amount paid on all taxable supplies during the tax period; and
“A” is the amount paid by the registered person on all the supplies during a tax period.
Also, when a registered person pays or is liable to pay a part of the consideration for a taxable supply, any input tax credit to which the person is entitled shall be calculated on the basis of the amount of the consideration such person pays or is liable to pay.
Partial input tax calculated on monthly basis is provisional. Annual increasing/ decreasing adjustments can be made for the calendar year with the approval of the VAT Commissioner considering the above factor on annual basis.
v) Withholding VAT implication on sub-contract project
For any project, the VAT has to be collected or deducted and deposited to Government Treasury at the time of payment of service value or commission by a person receiving the service. If the service provider appoints any sub-contractors, agents, or any other service rendering persons, VAT shall not be collected at the source again from such sub-contractors, agents, or any other service rendering persons appointed by the main service provider; subject to production or submission of documentary evidence of early stage’s collection or deduction of VAT and the deposit of such VAT to the Government Treasury. However, this rule is not applicable for purchasing goods under the project.
The above provision was present in the old VAT Act 1991 under subsection 4AA of section 6. However, when the new VAT regulation (i.e. the VAT & SD Act, 2012) came into effect from 1 July 2019, this important provision was not incorporated. Consequently, considering the importance of this law for the project contractors, it has now been reintroduced into the new VAT regulation