Exporters can speedily pass through ports as VAT-exemption process relaxed

Exporters now can enjoy speedy cargo delivery from the customs ports as the time-consuming VAT-exemption process has been relaxed to give them a quick pass.

The value-added tax (VAT) wing of the National Board of Revenue (NBR) deleted the mandatory provision of obtaining VAT-exemption certificate, on a case-to-case basis, to get export-import products released from ports.

The policy wing on VAT issued an order on November 11, 2021 relaxing the provision following proposal of the exporters and operators of the private inland container depots or ICDs.

The order, signed by First Secretary (VAT policy) Kazi Farid Uddin, has been given retrospective effect since September 26, 2019.

The issue came into the limelight after Chattogram VAT authority demanded around Tk 330 million from the off-docks or private ICD operators against their release of cargos without VAT-exemption certificate.

As per VAT law, exporters are exempted from payment of VAT on their port services.

However, the new VAT and Supplementary Duty Act 2012, passed in June 2019, imposed a provision making VAT-exemption certificate mandatory for each of the export-oriented companies.

Exporters had to obtain the certificate from customs, excise and VAT commissionerate (VAT zone) and produce to the port customs or private ICD to avail the VAT exemption, said a senior VAT official.

"From now on, the port authority, freight forwarders, insurance companies, shipping agents would be empowered to allow VAT exemption on the basis of relevant documents as an evidence of hundred- percent export-oriented company."

The VAT-registration certificate or documents provided by Bangladesh Investment Development Authority (BIDA), Bangladesh Export Processing Zones Authority (BEPZA) and similar entities, certificate of exporters' association would be sufficient to prove a company as cent-percent export-oriented one.

To clear the quandary he said the VAT law 1991 had the provision which was not incorporated into the new law, causing sufferings to the exporters.

Earlier, representatives of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Knitwear Manufactures and Exporters Association (BKMEA), and Bangladesh Inland Container Depots Association (BICDA) had held a meeting with the VAT authority pointing out the problems.

Talking to the FE, secretary-general of BICDA Md Ruhul Amin Sikder said the process of obtaining VAT-exemption certificate was "illogical and caused unusual delay in release of products from customs port".

The Chattogram VAT authority charged six ICDs around Tk 330 million, serving a show-cause notice that the VAT exemption has not been allowed in a proper way, he added.

"We hail the NBR decision, although a bit late, that would help to resolve the longstanding problem," he said.

Documents or exporter's BIN (business-identification number) shows the evidence of an export-oriented company, he added.

Mohammad Hatem, vice president of BKMEA, says the decision would help ease the doing-business ambiance in the country.

"Obtaining VAT-exemption certificate was a troublesome job as exporters had to furnish a number of documents, causing unusual delay in release of goods," the export-industry leader added.

Under a Statutory Regulatory Order (SRO -188), issued on 30 June 2019, 100-percent export-oriented companies, 100-percent deemed export companies and companies located in EPZ are eligible to enjoy VAT exemption on port-service charges.

"When these three types of exporting companies obtain ICDs' services, we used to allow VAT exemption as per the said SRO," said the BICDA secretary-general.

However, a general order (20) issued on September 26, 2019, after that SRO, states the mandatory requirement of VAT-exemption certificate.

"Chattogram VAT office accused private ICDs of violation of the GO as it stated VAT exemption certificate has to be obtained from the particular VAT offices or zones where the factory of the exporters located," Mr Sikder said.

However, the GO contradicts the SRO and lack of detailed procedures how the exporters would obtain the exemption certificate, process of approval, its timeframe, he added.

Since 2003 till 2019, the ICDs had allowed VAT exemption on port services without the certification.

Industry-insiders say exporters should keep themselves busy with export diversification and stay competitive on the international market rather than spending time and cost to deal with VAT issues.

They rue that the government claims simplification of services but in reality some issues are getting more complex.

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