The Financial Express

Multiple VAT registration becomes a bane of manufacturers

| Updated: May 10, 2021 15:51:04

Multiple VAT registration becomes a bane of manufacturers

Most of the manufacturing industries, despite maintaining financial statements centrally, are unable to obtain central VAT registration due to a 'faulty' piece of legislation, businesses alleged.

Large companies having multiple distribution centres have to obtain VAT registration for each of their units from VAT offices, as they are unable to meet the complex criteria of central registration rules.

Such procedure, according to the businesses, increases their cost of doing business and creates scopes of harassment by field-level VAT officials.

In the absence of central registration, the manufacturers have to maintain 'pay VAT' for transferring goods from their one unit to another, as VAT officials consider it as sales.

Many VAT experts have also pointed it out as a major impediment to efforts for simplifying the business practices.

The VAT professional forum, in its budget proposal, has urged the government to address the issue in the budget for the fiscal year 2021-22.

Currently, a company manufacturing products in one place and selling those from multiple outlets is not entitled to central registration. The majority of the manufacturers have been doing their business the same way.

For example, a limited company has to obtain 12 VAT registrations for having a manufacturing place, 10 sales centres and one head-office, although it maintains accounts centrally.

In their proposal, the forum leaders demanded allowing businesses to obtain the VAT registration centrally, if they maintain accounts centrally.

They said the scope of VAT evasion as well as intervention of field-level officials would be minimised with the simplification of rules for central VAT registration.

VAT registration, known as Business Identification Number (BIN), is mandatory to operate businesses, conduct export-import activities and avail different services.

Currently, the businesess, availing reduced or concessonary VAT rates that are below 15 per cent standard rate, are also barred from central registration. Also, companies are entitled to central registration, if identical or similar goods or services are provided.

Shekhar Ranjan Kar, general manager - accounts and finance of BSRM, said they had filed a writ petition in the High Court (HC), challenging the faulty law and got verdict in favour of the company.

Later, the National Board of Revenue (NBR) went to the Appellate Division, and got the HC order stayed.

However, the BSRM got permission to carry out its operation smoothly, and it is transferring goods within factory without paying VAT, he also said.

The original VAT law had the simplified provision that was changed later by issuing Statutory Regulatory Order (SRO).

Some other large manufacturing industries, including Abul Khair and PSRM, may also file writs citing the case of BSRM, he mentioned.

"We are paying below 15 per cent VAT, and unfortunately are not allowed to obtain central registration as per the law."

There is no reason to interlink allowance or disallowance of central registration on the basis of VAT rate, he added.

Md Fazlul Haque, manager (accounts and finance) of Beximco Pharma, said the current central registration is a distortion of the original VAT law.

"The branch concept should be eliminated by promoting one company one registration rule."

Why businesses have to count VAT for inter-factory transfer until they supply the products to consumers, he questioned.

The existing central registration rules are against ease of doing business. The NBR has many tools to monitor VAT evasion by businesses rather than framing complex procedures for them, he added.

A limited company has registration under the Registrar of Joint Stock Companies (RJSC) under company law and has a Tax-payer Identification Number (TIN) under income lax law. So such companies should have one BIN, the VAT professional forum proposed.

A company should prepare accounts on the basis of same turnover, to be submitted to three regulatory agencies.

The VAT experts failed to find any relation between central VAT registration and identical or similar nature of goods or services.

Talking to the FE, a senior NBR official said they framed the central registration criteria to check VAT evasion by businesess.

It is true that some complaint businesses face problems for the conditions that the NBR generally imposes for all.

"We consider each unit as diffrent entity, if manufacturers do not have central registration. Narually, they have to pay VAT for shifting goods from one to another as per VAT law."

VAT officials need realtime data of accounts trasaction for the companies that only a few can provide.

He, however, claimed that many of the businessess have secured the central registration under the existing rules.

Businesses said most traders could obtain central registration, while manufacturing companies are facing problem.

The VAT official said there are some technical problems in allowing some categories of businesess for central registration.

For example, an owner of a tea garden in Sylhet has opened an office in Dhaka. If the tea garden obtains central regitration, determining the VAT monitoring zone will be difficult. Thus, there might be scopes of VAT evasion, he noted.

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