New VAT law up for revision ahead of July 01 deadline

FE Report | Published: October 15, 2018 10:15:06 | Updated: October 16, 2018 11:31:52

Picture used for representational purpose

The new Value Added Tax (VAT) law, passed by the parliament in 2012, and VAT Rules-2016 would be amended for the sake of smooth implementation from the next fiscal year.

Some important provisions of the VAT and Supplementary Duty Act-2012 and VAT Rules-2016 would be revised to make them business-friendly and easier to implement by the VAT officials.

The chairman of the revenue board has taken steps to make the law implementable by carrying out some amendments on an urgent basis.

The new law is scheduled to come into force from July 1, 2019.

The government deferred implementation of the law by two years in 2017 in the face of opposition from the businesses.

Businesses have demanded multiple rates of VAT instead of a single rate of 15 per cent. They have also demanded an increase in the turnover tax ceiling.

A joint committee, comprising VAT officials and business community, is working on the amendments to the new VAT law and VAT rules.

Field-level officials have raised some operational problems relating to the new VAT law and rules, including VAT rebate to the businesses, VAT registration, and penal provisions.

To make the amendments, the VAT Online Project (VOP) under the National Board of Revenue (NBR) has sought opinions of all field-level officials by October 17.

The VAT policy wing of the board has instructed the VAT officials across the country to send their recommendations in a format prescribed by the NBR.

The format includes -- provisions of existing law and rules, proposals for amendments and logic against the proposals.

Officials said the NBR would hold an internal meeting to be chaired by its chairman Md Mosharraf Hossain Bhuiyan on October 18 next with the all VAT officials to discuss their proposals.

A senior VAT official of a field office said the language of the new VAT law should be simplified for making it understandable to the businesses and VAT officials.

Currently, VAT officials face difficulties in understanding many of the provisions of the new law because of its complex language, he said.

The new law also lacks specific definition on input tax credit, he added.

"The lacking may cause a significant amount of revenue loss as people would be able to claim VAT rebate even by purchasing land," he added.

Also, the exemption ceiling up to Tk 3.0 million (30 lakh) for small businesses might cause an uneven playing field for the businesses, he said.

"The VAT rate should be multiple instead of single. There must be separate VAT rates for production stage, import stage, commercial service and other services," he said.

The VAT rate could be set at 10 per cent for commercial services including banking sector while it could be fixed at 5.0 per cent for the services to the end users, he added.

He said VAT rates for end-users of products should be lower to encourage payment of VAT.

Cost of living would not increase substantially if the VAT rates remain lower for end users, he added.

Talking to the FE on Saturday, Dr Ahsan H Mansur, Executive Director of Policy Research Institute of Bangladesh (PRI), said the new VAT law does not need massive overhauling.

"Some points can be addressed for its easy implementation," he said.

Dr Mansur agreed that VAT for some of the services sector including doctors, lawyers could be set at lower rates, where input credit is less.

"Other than those sectors, a uniform VAT rate at 15 per cent can be enforced as there is a provision to get tax rebate on raw materials and inputs," he added.

Officials said recommendations of both VAT officials and businesses would be actively considered to bring amendments to the new VAT law.

The new VAT law is focused on automated record keeping for ensuring transparency.

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