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Collection of VAT falters as the revenue authority may discard its plan to install Electronic Fiscal Device (EFD) in retail outlets countrywide following alleged noncompliance by the third-party contractor.
This happens to be a second time in a row the National Board of Revenue (NBR) failed to get installed the electronic devices for VAT collection in retail level.
The contractor, Genex Infosys, has violated the contract with the VAT authority of the NBR to install the devices, officials said.
Two teams of the NBR, Functional and Technical, in their report have made this allegation of contract infringement.
On Thursday, NBR chairman Abdur Rahman Khan instructed the VAT wing to issue show-cause letter to the company, listed with the country's capital market.
A senior member of the NBR says performance report of the company, submitted by the teams, has identified major flaws, including providing substandard devices.
"We found the features to check retail VAT evasion not available in the devices, imported from China," he adds.
The Sales Data Controller (SDC) could not be set up in these devices.
As per Public Procurement Rule, they would face the action, but the NBR would hear from them first, he explains the proceedings to follow.
The company was supposed to install 60,000 EFDs in Dhaka and Chattogram in the first year and 0.3 million in the subsequent five years. Only 11,000 devices have so far been installed since 2023, and not following the contract specifications.
"We had a plan to install EFD in an area maintaining uniformity so that no businesses lose customer for having VAT-collection devices, but it has not happened for the company's noncompliance," says the revenue executive.
Also, Genex was supposed to organise awareness-and motivational campaigns for popularizing EFD use which it didn't.
"Our technical committee has said the installed devices are mostly substandard in qualities which the company installed to reduce its cost," he adds.
Official sources say the Genex authority also expressed its unwillingness to invest more in EFD installation as their quoted cost in the tender has got bloated due to devaluation of the local currency against the US dollar.
They have said the company has submitted its bills which are under scrutiny at the NBR now.
"So far, the NBR has not paid the bill of the company. It needs to conduct a scrutiny from the Bangladesh Computer Council (BCC) before paying the bills," the official further says.
The NBR, in August 2023, signed an agreement with Genex Infosys.
As per contract, the company is supposed to install devices at its own cost, for which it will get a commission of 0.53 per cent on Tk100 VAT collection.
Professor Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue (CPD), notes that the government is not getting its due VAT from retail outlets despite having huge potential.
"The NBR must find an easy technological solution on the basis of international best practices soon," he suggests.
Use of automated VAT-collection system must be made mandatory by tagging it with the renewal of trade licences, he adds.
The company denies neglect on their part. "We have consistently conducted activities in compliance with all relevant regulations. EFDMS is a breakthrough step to ensure transparency and increase revenue at all retail levels of Bangladesh," says Abu Jahid Parag, Head of Corporate and Regulatory Affairs, Genex Infosys PLC.
"We are conducting our part in this pilot project with utmost efficiency as well as maintaining all the rules and regulations of NBR. Hopefully, this project will ensure increased revenue and transparency at all retail levels in Bangladesh," he told the FE on Thursday.
In 2009, the NBR made installation of ECR mandatory at shops in 11 categories across the country, including hotels, restaurants, sweetmeat shops, department and general stores, jewelry, all shops at shopping malls in metropolitan areas, and medium and large wholesale and retail shops.
After a decade in 2019, the revenue authority dropped the plan to provide ECR, after installing around 3,000 out of eligible 11,005 across the country, due to its manual-like operation as well as after-sales service issues.