Foreign organisations in Bangladesh, including UN agencies, are expected to get VAT refund expeditiously as the revenue board's relevant office moves to go digital to end their long wait.
Foreign agencies are exempt from value-added tax on local buys, so are exporters on raw-material imports, as per the tax law.
Officials say the Duty Exemption and Drawback Office (DEDO) has made the move to automate its services to cut VAT-refund-claim-disposal time to an hour and speed up its other services.
DEDO, the lone entity to pay back VAT to foreign organizations, has run its activities under manual system since 1987, they say.
Currently, processing and resolving refund claims of the UN organizations, embassies and diplomatic missions need more than a week-sometimes staggering over several months or years.
The officials said some refund applications remained pending since 2018 and were resolved only recently.
The DEDO recently developed a website and also sent a proposal to the National Board of Revenue (NBR) to develop a VAT-refund app.
Following request of the 10 specialized organizations of the United Nations (UN) working in Bangladesh to automate services, the wing planned to develop the refund app, titled DEDOPAY.
The app would help the foreign organisations to submit refund applications and get refund of the paid VAT from the Duty Exemption and Drawback Office.
DEDO is empowered to settle VAT-refund claims of these foreign organizations.
Annoyed over the time-consuming procedures in the VAT provisions delaying VAT refund to its agencies, the UN office in Bangladesh earlier had sought upfront exemption status for them.
Then United Nations Resident Coordinator in Bangladesh Mia Seppo in a letter to the Ministry of Foreign Affairs expressed her concern over the complexities in the outmoded refund process.
In the letter on October 4, 2021, it was alleged that the DEDO had not processed and reimbursed VAT claims of the UN agencies since July 2019.
Once the platform introduced with approval from the NBR, refund applicants would get a unique ID and will be able to track status of their applications, officials say.
From January 17 to February 15, the DEDO had refunded VAT worth Tk 395 million by resolving 385 cases of UNHCR, UNICEF, UNDP, WFP, UNFPA, WFP, WHO, ILO, IBRD, IFC, ICDDRB and different embassies.
Of the organizations, UNFPA got Tk 200-million refund followed by WHO Tk 7.9 million and ICBBRB Tk 2.6 million.
"We have taken step to upgrade DEDO as department from current directorate," says Md Belal Hossain Chowdhury, Director-General of the DEDO.
He notes that services of the DEDO are linked with image of the country as foreign missions and embassies get VAT refund from the wing.
So far, DEDO has disbursed Tk 390 million worth of refunds to the foreign organizations.
After Mr Belal joined as DEDO chief, some 26,000 pending refund claims of foreign organizations have been resolved.
He feels that the DEDO needs budget allocations to implement its plan and maintain the app.
The office gets around 400 refund claims daily which need time to scrutinise manually.
As per compliance with the convention on the Privileges and Immunities of the United Nations and United Nations Development Assistance Framework (UNDAF), Bangladesh permits the UN agencies to claim VAT refund on locally procured goods and services.
As per the VAT law, privileged organisations are exempt from payment of VAT on many services, including fuels for their vehicles, furniture etc.
They are entitled to get refund of the VAT that they paid at the time of availing services or purchasing products.
Sections 68 to 72 of the new VAT law have a clear direction on the refund process. Section 71 of the law states the refund-giving process for diplomatic missions and international organisations.
Earlier, Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh (LFMEAB) proposed to the DEDO to automate its services and develop a website to minimize physical visit of the exporters.
Apart from VAT refund to the foreign organizations, the wing also determines the input-output coefficient required for calculating the refundable duty exporters pay on imported raw materials.
The DEDO recommends the field offices on refund of the duty and VAT by crosschecking whether the exporters have properly used the raw materials in production and export of the products.