'Impose VAT on all, scrap exemption provision'

A revenue board committee has proposed the government to impose Value Added Tax (VAT) at a reduced rate on all businesses by scrapping the provision of exemption ceiling for small businesses in the new law.

In a recently-submitted report to the National Board of Revenue (NBR), the high-powered committee also proposed withdrawal of package VAT and tariff value as well as keeping the existing truncated value-based VAT rates unchanged.

It also suggested that the NBR follow the VAT registration system or Business Identification Number (BIN) issuance process as per the existing VAT Law 1991.

Currently, businesses are obtaining BIN following the provisions of the new VAT law. In the new system, already 0.1 million businesses have obtained new VAT registration numbers.

In the new VAT and Supplementary Duty Act, passed by the parliament in 2012, there is an exemption ceiling for the small businesses having annual turnover below Tk 3.6 million.

The new law, scheduled to come into force from July 1, 2019, also contains the provision of a uniform rate of VAT at 15 per cent for all businesses.

Talking to the FE, a senior NBR official said although the committee report proposed truncated value-based VAT rate, the government high-ups preferred multiple rates.

"NBR has already instructed the committee to explore the possibilities of introducing multiple rates of VAT in the new law," he said.

The committee, convened by Dhaka Customs House Commissioner Abdul Mannan Sikder, recently submitted the report to NBR Chairman Md Mosharraf Hossain Bhuiyan.

NBR formed the committee on November 11 to identify the challenges in implementing the new VAT law and to submit proposals on its amendments.

NBR will hold an intensive discussion with the businesses on the proposed amendments to the new law. A meeting will be held with the Federation of Bangladesh Chambers of Commerce and Industry today (Wednesday) on implementation of the new VAT law, the official further said.

The amendments of the new law will have to be placed before the parliament for its approval.

The committee has proposed to scrap the central BIN-obtaining process in the new law and to keep the jurisdiction-based BIN issuance system unchanged, he added.

Officials said implementation of the new VAT law faced several blows due to strong opposition from businesses. In fiscal year (FY), 2016-17, the government deferred implementation of the new law by two years, until July 1, 2019.

They also said under the proposed truncated value-based VAT rates, there will be no provision for obtaining VAT rebates on inputs or raw materials.

According to the VAT officials, the truncated value-based VAT rate is a distortion, and creates scope of VAT evasion.

In its report, the committee also recommended withdrawal of the value declaration system for businesses to make the VAT payment system hassle-free.

It, however, proposed to keep the provision of 'input-output coefficient' unchanged.

Under the system, the businesses will have to keep a record of raw materials and other inputs that they use for production. The VAT officials will be able to measure the value addition of the products using the raw materials.

As per the committee's proposal, there will be reduced rate of VAT for small businesses that are currently enjoying package rate of VAT.

The officials said the committee proposed to keep some of the major provisions of the existing VAT Law 1991 unchanged, including VAT registration system and truncated value-based VAT rate.

They also said the new provisions could be incorporated in the existing VAT law instead of implementing the new VAT law.

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