Small businesses that were enjoying package VAT (value-added tax) system until June 30 are in confusion over the provision of the new VAT law on exemption ceiling.
As per the law that took effect from July 01, a business having an annual turnover below Tk 5.0 million is exempted from VAT payment.
Many small traders, especially the ones from the old part of Dhaka city, sought a specific guideline from the National Board of Revenue (NBR) to this end.
This issue might spawn a spat between small businesses and VAT officials, they expressed the fear.
Under the package VAT system, small businesses were paying a lump sum of VAT to the public exchequer.
The latest law has, for the first time, introduced an exemption ceiling for them.
Solaiman Parsee Faisal, director of Pipe and Tube Well Merchants Association, said the VAT-free limit might cause harassment to some businesses unless the NBR clarifies the provision of exemption.
"It would be difficult to prove that they are entitled to enjoy the VAT-free limit," he added.
Mr Faisal said VAT officials often ask for VAT chalan by seizing vehicles on shipment.
Without having any specific order from NBR, small businesses would not be able to convince them on the entitlement of VAT exemption, he added.
Helal Uddin, president of Bangladesh Shop Owners Association, said the NBR is moving at a slow pace over the issue after making the new provision effective.
"There should be a clear guideline for the businesses that are eligible to enjoy VAT-free ceiling. VAT officials are yet to start working on this issue," he added.
The NBR should determine which businesses would fall under VAT-free category and which ones under turnover VAT system, he added.
Former president of Bangladesh Electrical Association Mir Nizam Uddin Ahmed said their members are worried over determination of such ceiling by VAT officials.
"The process of determining the VAT-free businesses should be done with the involvement of representatives of businesses. Otherwise, disputes may erupt between the VAT officials and the small businesses," he cited.
When asked, VAT officials said they might issue a guideline soon to clarify the issue.
The revenue authorities would lose many regular VAT payers due to this VAT-free ceiling, they added.
A senior VAT official said some businesses might intentionally claim themselves to be small businesses to enjoy exemption.
"Only small grocery shops would fall under VAT-free businesses category," he mentioned.
Hafaz Harun, former secretary of Bangladesh Plastic Association, said a business that sells worth Tk 20,000-25,000 daily would be entitled to the benefit.
"We're happy that the government has kept the exemption ceiling as per the demand of the businesses. Now, they have to categorise those businesses," he stated.
Talking to the FE, multiple field-level VAT officials admitted to their having some confusion over the issue.
It might take some time to be accustomed with the provisions of the new VAT law, they added..
Meanwhile, the NBR has started imparting training to VAT officials on the measures of the new law.