vat handout 2010 (ms)

Value Added Tax MD. LUTFOR RAHMAN1. VAT On Trade Commissioner Date 19.06.10What is VAT?

• VAT is a consumption tax or indirect tax• First introduced in France in 1954 It is a tax on value addition in course of selling or transferring goods or services• VAT = (Production Value – Input Value) x Tax rate

VAT AdministrationAdministered by NBR (VAT wing), Chairman, Member, 1st Secretary, 2nd Secretary - 7 VAT commissionerates (Commissioners office) - 32 divisional offices and more than 100 circle office Tools for VAT Administration:

Value Added Tax Act,1991 Value Added Tax Rules, 1991, Audit manual SRO, Notification & Standing Order

• VAT was first devised • By a German economist during the 18th century• Its main philosophy is not to effect the cost of manufacture or distributor & Collected on final consumption or final price;• Finally adopted by France in 1954 on large business (10th April)• In 1973 UK replaced sales tax with VAT;• It is a neutral & Multi – stage taxation system, collected at every stage• Tax on value addition & No cascading affect or Remove cumulative tax factor• Input tax credit mechanism & Invoicing is the main feature What is Value Addition?

Value Addition = Wages (salaries, utilities, overhead expenses) + profitOr, (Output price - Input price) = value addition or,(Selling price - Purchase price) = value added

How does VAT workA B C D

Import Input Price= 300 /- Producing price = 600/- Producing price = 800/- Producing price = 1000/-

VAT = 45/- VAT = 90/- VAT =120/- VAT= 150/-Value including VAT = 345/- Net Tax (90-45) = 45/- Net Tax (120-90) = 30/- Net Tax (150-120) =30/-

Import stage 1st Producer 2nd Producer 3rd Producer

Revenue = 45/- Revenue = 45/- Revenue = 30/- Revenue = 30/-

Copyright @ Lutfor

Total government revenue = (45+45+30+30) = 150/-

Tax liability: On • Manufacturer, Trader & supplier• Service rendered• Importer & Exporter

VAT Network• Trading & Imported goods• Manufacturing & Supply of goods• Rendering services

Credit/Adjust• VAT paid on inputs (Raw materials) is

- Creditable or Adjustable [except the final consumer] against output Tax & documentation can ensure forward shifting of VAT, but in case of Tariff Value credit mechanism does not work Input tax must be deducted within 60days of the goods in question being received in the business premises (Sec-9)

Tax creditCredit on input tax against out put tax payable on goods manufactured, treaded, supplied or service rendered by him except;

1. Tax paid on exempted goods2. Turn over tax paid on input3. SD paid on input4. VAT paid on package except for the 1st time5. VAT paid on construction, balancing, modernization, replacement,

expansion, renovation, repair etc6. VAT in excess of the rate of VAT7. VAT paid on travel, entertainment, staff welfare, & development activities8. VAT paid on Tariff Value9. Truncated base

VAT in Bangladesh & World Introduced in July, 1991, Replacing Excise Duty at manufacturing stage - And Sales Tax at Import stage- Total VAT Reg. persons/Firms = 6.50 lac

VAT implemented Countries = 61 77% Countries have VAT rate 15% & above

Characteristics of VAT• VAT has no cascading effect or no Tax on tax because of credit mechanism• Self-Assessment/Self Clearance / Self policing system• Built-in cross audit feature• Easy to apply/ Universality

Copyright @ Lutfor

• Trade Friendly & Mostly Single rateVAT-able goods & Services* All goods (imported, locally manufactured, traded) except those mentioned in 1st Schedule of VAT Act* All services except those mentioned in 2ND Schedule of VAT Act

Mandatory VAT (Turnover Tax or Cottage Industry is not allowed)1. Lozenge 2. Biscuit, Chanachur 3. All fruit Juice & drinks 4. Mineral water5. Energy drink6. All kinds of cigarettes7. Zarda & Gul 8. Medicine9. Cosmetics10. Hair care item/product11. Soft drinks, Energy drinks12. All soaps including liquid13. Coconut oil14. All fruits Jam & jelly15. Antiseptics & disinfectants16. Paints, pigments, varnish17. Shaving materials18. All matches19. Mosquito coil20. PVC pipe21. All shoe & Sandals (>80tK)22. All bricks23. All ceramics & porsoline 24. MS products25. Electric Fan26. Dry cell & storage battery27. Electric bulbs28. Rubber & Plastic foam

Exemptions All goods mentioned in 1st schedule

Primary Ag. Products, Life animals, raw jute, vegetables, Seed, Fruits, computer, Life saving medicine & equipments, Wood, leather, silk, cotton etc

All Services mentioned in 2nd scheduleLife leading basic services, religious & personal services

Social welfare, Cultural, Transportation & Financial service Goods and services exempted by SRO No-199/10 of Table – 1, 2, 3, 4 & 5 Cottage industries granted by concerned commissioner & Turnover Tax

Copyright @ Lutfor

Tax rate- 15% advelorum & 0%

VAT Factor- 3/23 or 15/115 or 15% on base value

Rates of VAT

• Basically 15% for all imported, locally manufactured, traded goods and services

• 0% for all exported goods

• Preferential rate of 4% for small-scale businesses (Turnover tax)

• Cottage Industry (No duty & taxes at all)

• Excise Duty (Bank deposit & Local air ticket only)• Truncated bases (1.5%, 2.25%, 4.5%, 5% & 9%)• Fixed duty

Cottage Industry Not a joint stock company Invested capital in plant, machinery& equipment not more than 25 lacks

(any time in the year) Annual turn over not more than 40 lacks Value declaration by the VAT registered Company & approved Sub contract

basis other branded goods can be made (FY- 09), here registered Company will pay VAT not cottage industry

All VAT & SD exempted Application, enquiry & finally approved by commissioner of VAT

SRO-168 / 03

Fixed TAX ( SRO-209/10) a) Dhaka & Ctg city cor. area……… 4200 6000 tk b) Other city cor. area ……… 3600 4800 tk c) District city municipality area…... 2400 3600 tk d) Other area of the country .…… 1200 1800

(a. here value addition 40000 & VAT rate 15%)For small retail business or shopsAnnually once or monthly installment To determine annual value addition calculate approximate profit of the business, electricity, telephone, rental, salary, transportation cost etc. SRO- 209/10 Who are to pay VAT?- All importers irrespective of turnover & all business dealing goods & services, having an annual turnover of taka 60 lacks or more

Copyright @ Lutfor

- Wholesaler & Retailer (96-97 FY) Value addition 20% & VAT rate 3% (FY-10)- All businesses dealing in goods and services, having an annual turnover of less than taka 60 lacks need to pay Turnover Tax @ 4%

Registration for VAT# All Importers, exporters, manufacturer/Supplier of goods & services renderer # Any taxpayer runs more than one business from different place must register separately for each# All businesses having a VAT threshold* [Failure to register despite legal obligation punishable offence]Registration•Application in Form Musak-6 along with: - Photographs (2) & TIN certificate - Trade License & Lease Agreement/Rental documents - Bank Account Number & IRC, ERC (if necessary) - Musak- 7 (Blue print, Goods, Input etc) For Production -Others (as per requirements)

Central Registration Have to have permission from NBR Opportunity to pay VAT from central premises for all branches. Business & accounts controlled centrally Applicable for service rendering and trading stages except manufacturing stage. Registers kept centrally but commercial records in all branches List of all branches & duty as applicable elsewhere VAT-11 Challan issued centrally. Exemption from registrationExempted by general or special order - Annual turn over - Any importer or ExporterVoluntary RegistrationAny change then need to inform 14 days before

How are to pay VAT?

- VAT Registration is mandatory- At import stage importers pay VAT in BoE along with Customs Duty- Businesses pay VAT as they collect in course of selling goods and services- VAT collected at sources- Commercial importer’s pay VAT as “Advanced Trade VAT” @ 3% at import stage. Retailers mainly pay VAT 3%

Electronic Cash Register (ECR)

Copyright @ Lutfor

1. Hotel2. Restaurant & fast food3. Sweet Shops 4. Furniture sale5. Beauty parlour6. Community center7. Shopping mall8. Departmental store9. General store10. whole sale & retail shop (large & medium)11. All kind of Gold & Silver seller & purifier (09)

Order- 17 /08

ATV (Advance Trade VAT)• Introduced ------ 22. 09. 04• Paid at import stage for commercial importers• Assessed in Import BoE• Value addition 15% for all & Rate of Advanced Trade VAT 3%• Normally not creditable & refundable

ATV exemption• Goods in 1st schedule & service in 2nd schedule• Govt. Semi-government, Autonomous, Embassy, Diplomats, Educational &

religious institution.• Bond licensed 100% export oriented industry• Baggage rules & Temporary import etc & exempted by SROs

ATV refund• If construction firm, tender bidder, Supplier pay VAT more than ATV• Application to divisional officer

Sec-67 & rule-34kha

Payment of VAT to Govt. Treasury- Bill of Entry at the time of Importation- Account Current & Treasury Challan along with Returns

- VAT Payment code 1/1133/0000/0311

- SD Payment code 1/1133/0000/0711

- Turnover Payment code 1/1133/0000/0921

SD Rate on Production

SL Segment Name of the goods SD Rate

1 Low Cigarette 8.40 – 9.15TK/10 sticks 33%

2 Medium 18.40 -19.00 53%

Copyright @ Lutfor

3 High 27 -32 56%

4 Premium 52 & above 58%

5 Manual Cigarette or Biri 20%

6 Soft drinks 15%

7 Ceramic tiles, basin & other products 20%

8 Zarda & Gul 20%

9 Mineral water(up to 3L) 5%

10 All Cosmetics 20%

Only Exception in VATCigarettes Calculated on retail price, If retail price = 100 tkHear SD rate = 55% & VAT rate = 15%Total tax = 70 tk, Hear revenue 70 tk and seller gets 30 tk Value for VATImport stage: Assessable Value (A V) = Cost (FOB price) + Freight + Insurance + Landing or handling Charge = Base value for dutyCustoms Duty (CD) = AV x % of duty SD = {(A V + C D) X % of SD}VAT = {(AV + CD + SD) X % of VAT}Duty paid value = (A V + All duty & taxes)

Local Manufacturing stage- Price of Raw materials (input)- All import duties and taxes (except VAT and AIT if paid at import stage) - All wages & expenditure related to its production/sale, commission etc and profit- Expenditure includes Packing materials, Electricity, Gas, Telephone & Other

services -Like WASA, transport, insurance etc.- Trade discount (Max 30 days in any 12 months & NMT 15% of actual value) Ref: Sec 5(2), VAT ActVAT calculation on Production stageAssessable Value (A V) = (All Input price + Commission+ Charge + Fee + All duties & taxes including SD + Profit) – VAT If paid before SD = A V X % of SD VAT = (AV + SD) X % of VAT Duty paid value = (A V + All duty & taxes) Wholesale Price = (Duty paid value + min10% Value addition) x 15% MRP = (Wholesale price + min 20% Value addition) x 15%

Copyright @ Lutfor

Tariff Value Fixed base value for manufacturing products

Total VAT = Tariff Value x 15%

It is easy to apply

Generalized & rationalized value for particular products

Credit mechanism does not workExample Manual Cigarette & Biri, All papers, Bricks, G.P & C.I sheet, MS product, GI wire, Blade, Ship scraps, Cold rolled coil, Diesel engine etc.Tariff Value (09)

Excise Duty on Bank deposit (Any time in the year)

- Up to 20 thousand ---------- Nil - Up to 01 Lac ---------- 120tk/ year - Up to 10 Lac -------- 350tk /year - Up to 01 Core ---------- 1000tk/year - Up to 05 Core ---------- 5000tk/year - More than 05 Core --------- 10000tk/yearDomestic Air ticket -------- 300tk/Journey

Obligations of VAT Unit• Declare value (for mfg only) & Maintain records of sale and purchase

• Issue Invoice (Mushak-11, 11ka) &

• Make payments to government treasury & submit Returns

Copyright @ Lutfor

• Period: Normally within 15 days of the following month InvoicingAll VAT registered units must issue invoices in prescribed form (Mushak-11, Mushak-11ka) to the buyers. Invoice includes the following information:

Suppliers name & address, invoice number, VAT Reg. number Customers name & address, Date of supply, Mode of transport Description of the supply to identify it, Quantity & tax inclusive price The amount of VAT, or VAT & SD if applicable, Paid• It can be Manual or Computerized (permission from commissioner)

Rule-16 (3 kha), 17 (2 kha) & 18 (3)

When to pay VATThe VAT is payable against supply of goods or services rendered when the immediate event amongst the following occurs:

(a) When taxable goods imported (pay with import duty)(b) When goods or service are delivered or supplied(c) When the invoice issued(d) When goods/service are delivered for personal use (e) When the price/payment received partly or fully

Mode of Payment- For all taxable Goods & Services

Treasury Challan with Return by adjusting the positive balance of account CurrentRecord keepingEvery manufacturer has to maintain the following Breaks of Accounts:

• Purchase register (Mushak-16)• Sales register (Mushak-17)• Account Current register (Mushak-18)• Treasury Challan• Invoice or Challan book (Mushal-11) & Return (Mushak-19)

Tax compliance (Returns)- Submit Monthly Return to the circle office (M-19) two copies within 10 working

days of the following month (Insurance 20 WD) - The return must be enclosed with- In case of production, supply or export (a) Original copy of account current (where applicable)

(b) Any other documents demanded by the commissioner - In case of providing & export of service

a. Original & duplicate copies of TR challan (where applicable)b. Any other documents demanded by the commissioner

Ref: s- 35& R-24 Trade-friendliness of VAT• Exemptions for primary agricultural products• Pay as you collect from buyers/consumers

Copyright @ Lutfor

• Credit mechanism: opportunity to credit the VAT paid on inputs at the Import or earlier stage• Preferential treatment for small businesses (turnover tax, cottage industry) Special Exemptions

Rights of a VAT Unit• Right to written notification in case of inspection by a VAT officer

• Right to getting a copy of inspection Report within a stipulated time

• Opportunity to self-defense in writing

• Opportunity of being heard• Right to appeal to the Commissioner as regards the value determined by a Divisional Officer• Right to appeal to the Commissioner/ Commissioner (Appeal) as regards any decision given by an officer below rank of a Commissioner• Right to appeal to Customs, Excise & VAT Appellate Tribunal when aggrieved by a decision of a Commissioner/Commissioner (Appeal)Refund

• Application within 6 months• Provisional assessment for Customs• Application to Divisional officer, Commissioner or his appointed officer (but

not below A/C)• TR- 31 form application (Verified by treasury officer)• Approved by A/C or appointed officer• Decision within 90 days• Pre-audit clearance• Account current adjustment is not refundable &Followed by Treasury Rules

Sec- 67 / rule- 34 kha

Different form on VAT1. M-1:Input-output ratio & value declaration, R-3(1)2. M-1a:Input-output ratio/Co-efficient of TV, R-3(9)3. M-1b:Business/Commercial importers value declaration4. M-1c:Co-efficient of exempted/exported goods R-(31a)5. M-2b:Annual declaration of Turnover, R-4(2b)6. M-4:Return of Turn Over Tax, R-4(4 & 5)7. M-5:Detention memo, R- 7(3)8. M-5a:Personal Undertaking for vehicle, R-7(3kha)9. M-6: Application form for Reg./Enlistment (VAT,TT,CI)10. M-6a: Application form for Renewal of registration12. M-7: Declaration of premise, Plant, Machinery etc. R-9(5)13. M-8:VATReg.TT/CI Enlistment certificate, R-11/4(2)14. M- 9: Application for Change of Premise/business, R-12

Copyright @ Lutfor

15. M-10: Application for Registration cancellation, R-1516. M-11:Invoicing , R-16(1)17. M-11a:Sales cash memo, R-1618. M-11b:Invoice verification(official), R-16(4) &17(3)19. M-11c:Invoice (Owners supply to manufacture)20. M-11d:Invoice(Service VAT), R-16(1)21. M-12:Credit note, R- 1722. M-12a:Debit note, R-17kha23. M-14:Undertaking of Imported machinery, R-2024. M-14a:Machinery Import without VAT,R-20(3)25. M-15: Declaration for Stock of Raw material,R-2126. M-16:Purchase Accounting book,R-22(1)27. M-17:Sales Accounting Book, R-22(1)28. M-17a:Purchase & sales A/B for TT, R-4(16)29. M-18:Account Current, R-22(1)30. M-19:VAT Return, R-24(1)31. M-20:Exportable goods release application,R-27(2)32. M-21:Application for established exporter Reg.,R-2833. M-22:Duty Drawback for exported goods, R-30(1)34. M-23:Sample approval application for flat rate ,R-30(2)35. M-24:Consignmentwise Drawback application,R-30(6)36. M-25:Duty Drawback through Post Office, R-2337. M-26:Unused/unusable raw material management, R-4038. M-27:Destroyed/Damaged goods management, R-41(1)39. M-28:Governmwnt dues recovery notice, S-56&R-4340. M-29: Warrant for Bank Account freeze, S-56(1) &R-43

2. Valuation in VATDifferent kinds of value

Transaction value - sec 5 (1) – Import Base value of VAT - sec 5 (2) - Manufacture Value of service - Total payment received Truncated value - Service only Tariff value - Fixed by board Value on the basis of MRP (Cigarette, Medicine, Aerosol etc. factory price) Back Calculation value for both product and service

Fix value for charity services and collect VAT Another two value systems

Copyright @ Lutfor

Conversion Charge: A manufacturer can get his goods produced by another manufacturer in exchange of some conversion charge on sub-contract basis.

Identical Value: A manufacturer or importer can supply goods at an identical value all over the country provided the price is clearly printed on the goods or its container and certain conditions are fulfilled, such as- goods stamped as “VAT paid at source”; charge, profit, commission, etc. are shown in M-1 form are fulfilled.

Declaration of Value in VAT Legal Provision - Sec. 5 of VAT Act & Rule-3 Value declaration in M-1

Time limit for Approval of value declaration 15 working days from the date of receipt of the value declaration

NO VALUE DECLARATION If declare Retail price (MRP) written clearly in indelible ink on the packet Submit MRP written packet with M-1D But base value not less than 2/3 of the MRP

Factor influencing value Market price Price of competitor Price of raw materials Brand name & image

Value for VAT Import stage : Assessable Value (A V) = Cost (FOB price) + Freight +

Insurance + Landing or handling Charge Customs Duty (CD) = AV x % of duty

SD = {(A V + C D) X % of SD} VAT = {(AV + CD + SD) X % of VAT}

Duty paid value = (A V + All duty & taxes) ATV = Duty paid value X 1.5%

Local Manufacturing stage- Price of Raw materials (input)- All import duties and taxes (except VAT if paid at import stage) - All wages & expenditure related to its production/sale, commission etc and

profit- Expenditure includes Packing materials, Electricity, Gas, Telephone & Other

services -Like WASA, transport, insurance etc. Ref: Sec 5(2), VAT Act

Inputs Raw materials & Packing materials,

Copyright @ Lutfor

Electricity, Gas &Telephone Other services like WASA, transport, insurance, etc.

Components of value Sec. 5 of VAT Act- principles Components:

– Value of all inputs, Value of wages– Profit & Wastage/depreciation

Value declaration & approval1. Base Value Declaration value including input output co-efficient in form M-12. Registered person may supply goods on assessment & payment from the date

on the basis of that declaration3. Any change or amendment submit new declaration in the form M-1, 7 days

before the execution4. Investigation, survey market value of identical or similar goods kept in the

Circle or Division office or office of the Commissioner within 15 days that ---Base value is inconsistent with sec- 5 of the act, orBase value is less than the value of the similar goods or same nature or quantity of same or any other jurisdiction; orValue addition as shown in form M-1 is significantly low; orValue is significantly low because of any relationship between supplier & purchaserOpportunity of being heard & determine the appropriate base value by the Divisional officer & will be effective from the date of such declaration

5. Process within 15 working days or shall be deemed, not have any objection to that value

6. Trade discount (Max 30 days in any 12 months & NMT 15% of actual value) & publish in a national daily & inform divisional officer also

7. Commissioner VAT may, suo moto or on application or market price can fix base value

8. Aggrieved Reg. person can apply within 30 days & Commissioner should give decision within 15 days

9. Board may constitute value review committee on the request from Divisional officer or Commissioner

10. Price lists of the goods shall be affixed in such a place so that it can easily be sighted.

11. In case of TV Reg. person shall submit input output co-efficient in M-1A to the divisional officer & approve after scrutiny & correction. Change or amendment needs to be heard

12. For service, board, by general or special order direct to declare value for assessing tax and determine the procedure

Tariff Value

Copyright @ Lutfor

Fixed base value for manufacturing products Total VAT = Tariff Value × 15% Easy to apply, No value declaration required Generalized & rationalized value for particular products Credit mechanism does not work Input output coefficient to be declared in M- 1a

3. VAT in service

VAT-able Services: All services except 2nd Schedule

Exemptions (16 Services)

S001.10 s001.20

Hotel & restaurant

Temporary hotel & restaurant with not more than two electric bulb & no electric fan

S004.00 Construction Construction services provided before June 1991

S006.00 Cold-storage Cold-storage

S007.00 Advertisement Advertisement firm regarding Classified ads in newspaper

S008.01S008.02

PrintingBinding

Printing press: Charges for printing books, periodicals, & student education promotional goodsAll kind of binding charge

S012.14 Internet Internet provider (only for educational Ins.) - 09

S027.00 Insurance Insurance company for sea going vehicle and private sector power generation company premium

S037.00 Procurement Procurement provider (only school Tiffin provider)

S038.00 Cultural program

Ticket less than 100 taka of cultural program where foreign artists perform

S044.00 Doctor Specialized doctor (09)

S048.00 Transportation Transportation contractor (only agricultural food carrier)

S055.00 Land seller

S057.00 Electricity Electricity for irrigation

Copyright @ Lutfor

S063.00 Tailoring &Tailors

Tailoring shops &Tailors other than those having A/C & the large Tailoring shops located in Dhaka & Ctg. Metropolitan area

S064.00 Tourist spot Tourist spot (including Historical place)

S016.00 Travel agency

S073.00 Manpower exporter

S075.00 All broker including stock broker

S077.00 Tour operator SRO 199/10 (table - 4)

Mandatory VAT Services

01

S001.10

Hotel 15 S012.20

SIM card supplier

02

S001.20

Restaurants 16 S015.20

C & Forwarding Agent

03

S002.00

Decorators and caterers

17 S018.00

Film Studio

04

S003.10

Motor Garage, workshops

18 S020.00

Survey Firm

05

S003.20

Dockyard 19 S023.10

Cinema hall

06

S004.00

Construction Firm 20 S023.20

Film Distributor

07

S005.10

Warehouse 21 S024.00

Furniture shop

08

S005.20

Port 22 S025.00

WASA

09

S007.00

Advertising Firm 23 S026.00

Jewelry (all kinds )

10

S008.10

Printing Press 24 S027.00

Insurance company

11

S009.00

Auctioneer 25 S028.00

Courier service & EMS

Copyright @ Lutfor

12

S010.10

Land developer 26 S029.10

Medical center

13

S010.20

Building construction 27 S029.30

Pathological lab

14

S012.10

Telephone, tele-printer, telex, fax & internet firm

28 S030.00

Beauty parlor

29

S031.00

Taxable goods repairing & servicing center (09)

41 S040.00

Security Service

30

S032.00

Consultancy & Supervisory

42 S046.0 Health club & fitness center

31

S033.00

Izaradar 43 S047.00

Sports organizer

32

S034.00

Audit & Accounting Firm

44 S048.00

Transportation contractor

33

S035.00

Shipping agent 45 S049.00

Rent-a -car

34

S036.10

AC Bus service 46 S050.10

Architect, Interior designer/decorator

35

S036.20

AC launch service, 47 S051.00

Engineering firm

36

S036.30

AC Railway service 48 S053.00

Attendee in Board Meeting

37

S037.00

Procurement Provider 49 S054.00

Advertisement provider via satellite channel

38

S038.00

Cultural program with foreign artists

50 S056.00

Banking & Non-Banking service provider

39

S039.10

Satellite Cable Operator

51 S057.00

Electricity Supplier

40

S039.20

Satellite Channel distributor

52 S058.00

Aircraft & helicopter chartered or rental Ins

5 S059.0 Glass sheet coating Indenting firm

Copyright @ Lutfor

3 0 institutions

54

S060.00

Buyer of Auctioned goods

Community centre

55

S061.00

Credit card issuing firm

Program

56

S062.00

Money Changer HR management & supply

57

S063.00

AC tailoring shop (Dhaka & ctg big only)

Place & building rental

58

S064.10

Amusement, theme park

59

S064.20

Amusement, theme park

60

S065.00

Maintenance Firm (floor, surface cleaning)

61

S066.00

Lottery Ticket Vendor

Other identified services01 S06.0

0 Cold storage 15 S045.0 Legal Adviser

02 S08.20 Binding charge 16 S050.20

Graphic designer

03 S011.00

Audio, video, CD shop/rental

17 S052.00

Sound/lighting equipment

04 S013.00

Auto laundry 18 S055.00

Land sale

05 S014.00

Indenting firm 19 S067.00

Immigration advisers

06 S015.10

Freight Forwarders 20 S068.00

Coaching center

07 S016.00

Travel Agency 21 S069.00

English medium school

Copyright @ Lutfor

08 S017.00

Community center 22 S070.00

Private medical, Engineering & College

09 S019.00

Photo Studio/Color / Black

23 S071.00

Program organizer

10 S021.00

Plant & machinery rental

24 S072.00

Human resource supplier & management Ins.

11 S022.00

Sweet Manufacturer/Seller

25 S073.00

Manpower exporter

12 S029.20

Dental clinic Stock & security broker

13 S042.00

Auto wood cutter/seasoning

Social & sports club Tour operator

14 S044.00

Specialized doctor Own branded garments Others

VAT Registration: ThresholdAnnual Turnover 40 lacks or more

Annual turnover less than taka 40 lacks go for Turnover Tax (TT)

Determination of value for services: Section 5(4) – total receipt against the services provided. Government can fix value for charity services & back calculated value ban be imposed. Truncated base

It is only for services. Truncated base for services at different rates

Ref: SRO 173-ain/2004/419-VAT; date: 10/06/2004

Truncated base of VAT ServicesSL

Name Rate

01 S001.20 Restaurant (AC & other) 15% & 6%

02 S003.10 Motor garage, Workshop & Dockyard 4.5%

03 S004.00 Construction Firm 5% 4.5%

04 S005.10 Warehouse & Port 15%

Copyright @ Lutfor

05 S007.00 Advertisement (private & public not classified add)

9% & 15%

06 S008.00 Printing press (Only Service or S + Input value )

4.5%

07 S009.00 Auctioneer 15%

08 S010.10 Land Development & building construction

1.5% (09)

09 S014.00 Indenting firm 15%

10 S015.00 Freight Forwarders 15%

11 S016.00 Travel agent 15%

12 S018.00 Cinema autographic studio 15%

13 S019.00 Photo composer 4.5%

14 S020.00 Surveyor 15%

15 S023.00 Film Distributor 15%

16 S024.00 Furniture manufacturing stage & Sale center (provided 4.5% paid at M stage )

6% 4.5% 3% 1.5%

17 S026.00 Gold & silversmith Jewelry (service) 1.5%

18 S028.00 Courier & EMS (on Service) 4.5%

19 S029.10 Medical Center 2.25%

20 S029.20 Dentist 2.25%

21 S029.30 Pathological Laboratory 2.25%

22 S032.00 Consultancy & supervisory Firm 4.5%

23 S034.00 Audit & Accounting Firm 4.5%

24 S036.10/20

A/C Bus & Lunch service 5.005%

25 S037.00 Procurement Provider 3% 2.25%

26 S040.00 Security Service 4.5%

27 S045.00 Legal advisers 4.5%

28 S048.00 Carrying/Transport contractors (Pet. Oil)

2.25% & 4.5%

Copyright @ Lutfor

29 S049.00 Transport rental 4.5%

30 S050.00 Architect, Interior decorator & designer

4.5%

31 S056.00 Banking &non Banking (fee, charge) 15%

32 S057.00 Electricity Distributor 5.0025%

33 S059.00 Glass sheet coaters 15%

34 S060.00 Buyer of auction goods 1.5%

35 S061.00 Credit Card provider 15%

36 S062.00 Money Changer 15%

37 S063.00 A/C Tailoring Soap (Dh & Ctg.) 4.5%

38 S064.10 Amusement & Theme Park 4.5%

39 S064.20 Picnic & shooting Spots 4.5%

40 S065.00 House Cleaning maintaining Org. 2.25%

41 S066.00 Lottery ticket Sellers 15%

42 S067.00 Immigration advisers 4.5%

43 S068.00 Coaching center 4.5%

44 S069.00 English medium school 4.5%

45 S070.00 Private medical, Engineering & College

4.5%

46 S071.00 Programme organizer 4.5%

47 S072.00 Human resource supplier & management Ins.

4.5%

48 S078.00 Won branded garments seller 5.005%

49

50

InvoicingMushak- 11 & Tax inclusive price

VAT from services at SOURCE

Copyright @ Lutfor

22 services for deduction at source

Source points: in most cases service receivers

a) Government, Semi-government, Autonomous institution, b) NGOs,

c) Bank, Insurance or other financial ins, d) Limited Co; e) Educational

institute.

If manufacturer supplies goods as Procurement Provider through Tender participation then need not deduct at source ***

Deposit in TR- 7 form or Book transfer within seven working days Record preservation six years & monthly report (M-18a) to NBR

central Data processing unit within 15 of the next month

A/C No: 1/1133/0000/0311, *** File NO- 6(3) dt: 28.09. 02 Section 6 (4kaka) & General Order No: 05/09

VAT from services at SOURCE (26)

1. Motor garage, Workshop 4.5%

2.Dockyard 4.5%

3. Construction Firm 5% 4.5%

4.Advertisement Agency 9% & 15%

5.Printing press 4.5%

6. Survey Firm 15%

7. Consultancy & Supervisory Firm 4.5%

8. Isaradar 15%

9. Audit & Accounting Firm 4.5%

10.Procurement Provider 3% 2.25%

11. Transportation Contractor 2.25%, 4.5%

12.Rent-a-Car 4.5%

13.Attendee in a Board-Meeting 15%

14. Buyer of auctioned goods 1.5%

15. Auctioneer 15%

16. Courier & EMS 4.5%

Copyright @ Lutfor

17. Travel Agent 15%

18. Maintenance Firm 2.25%

19. Vendors/Sellers of Lottery Tickets 15%

20. Security service 4.5% (08)

21. Engineering firm 15% (08)

22. Repairing and servicing centre 15% (08)

23. Decorators and caterers 15% (09)

24. Legal advisor 4.5%

25. Architect, Interior decorator & Graphic designer

4.5%

26. Aircraft or helicopter chartered or rental Ins

15%

Responsibility to deduct VAT at source Deduction and deposit of VAT payable on certain services is mandatory: Sec

6(4kha) & 6(4ga)

Certificate of deduction to be given to the service renderer

Interest @2% to be paid in case of non-deduction or non-deposit

Deducting authority will be dealt with as if the authority is a service renderer

Penalty not exceeding Tk 25,000/- to be imposed by the Commissioner in case of failure

Books of accounts Mushak - 11, 16 &17. Account current book (Mushak-18) is not usually

required for service renderer with the exception of cinema halls

VAT on Bank, Insurance, Hotel & Restaurant Banking & Non Banking Service provider

-all commission, fee, charge

(Except export & stock exchange payment) …… 15%

Insurance

-on all premium……………………………………. 15%

Hotel

-normally on sale ……………….………………….15%

Restaurant

-normally on sale ……………….… 6% & 15%

Copyright @ Lutfor

Advertisement Firm, Construction Firm, Building Developer, Furniture Advertisement Firm-Government, Semi-Government, Government Bank &Insurance ………………………………………………… 15% -Private, NGO, Private Bank & Insurance ……………….. 9% (Other than classified advertisement) -other ……………………………………………………… 15%Construction Firm- On quoted value ………………………………………… 4.5% Building Developer-on sale or handed over value …………………………… 1.5%Furniture -Manufacturing stage ………………………………………. 4.5%-Show room sale (provided 4.5% paid at Mfg. stage) …... 1.5%

SD Rate on Services

SL Name of the Service SD Rate

5 Hotel & Restaurant (Alcohol or floor show) 10%

6 All kinds of SIM card supplier 35%

7 Cinema hall 35%

8 Satellite channel distributor 25%

Central RegistrationPermission from NBROpportunity to pay VAT from central premises from all branches.Business & accounts controlled centrallyApplicable for service rendering and trading stages except manufacturing stage. Registers kept centrally but commercial records in all branchesList of all branchesDuty as applicable elsewhere VAT-11 Challan issued centrally.

Return SubmissionMushak- 19 Tax period- One calendar month, Three months (TT) & Six months

Copyright @ Lutfor

4.AdjudicationWhat is Adjudication?Adjudication in VAT and customs administration is a quasi-judicial process through which a competent VAT officer is empowered to adjudicate cases involving irregularities, non-compliance, tax evasion and other delinquencies.Quasi-judicial: Having characteristics of a judicial act but performed by anadministrative agency or official

Offences for adjudication

Minor1) For not getting registered despite obligation;2) Fails to submit a return within the specified date3) Fails to inform any changes about registration or4) Fails to comply with the direction of summons (S-25) 5) Violates any other provision of this Act, -

Majora. Fails to give a tax-invoice or gives untrue invoice;aa. Fails to pay revenue through directed twice, or fails to submit return after lapse of time specifiedb. Submits untrue material information return; orbb. Attempts to evade VAT by supplying goods without M-17 & payable VAT in M-18; orc. Evades or attempts to evade tax by submitting forged or false documents to a VAT officer;cc. Fail to present documents if asked twice by the officer or d.Non preservation or destroys or alters document or mutilates any part of document; or demonstrates it to be false; or doest preserve it as per requiremente. Makes consciously a false statement or declaration; orf. Obstructs or prevents from entering VAT officer; org. Engages himself in believe that VAT or, other duties payable on such goods has been evaded; or h. Takes input credit through forged or fake invoice; ori. Evades or attempts to evade VAT or SD; orj. Gives an invoice in which an amount of VAT is specified, though he is not a registered person; or (jjj) Removing goods or rendering service without positive balance of A/C(k) Does or abates in doing anything specified in clauses (a) to (jjj);

-Ref: Sec 37, VAT Act

Penalties• Minor

Copyright @ Lutfor

Fine not < 5 thousand & not > 25 thousand taka• Major

Fine not < Equal to & not > Two & a half times of the evaded duties Irregularities other than evasion

Fine not < 10 thousand & not > 1 lack taka

Competent VAT officer

Superintendent Assistant Commissioner Deputy Commissioner Joint Commissioner Addl. Commissioner Commissioner Commissioner (Appeal)

Power of Adjudication Adjudication of duty evasion & confiscation cases :

Rank Value of the goods

Commissioner => exceeding Tk 1500,000/- Add. Commissioner => not exceeding Tk1500,000/- Joint Commissioner => not exceeding Tk 1000,000/- Deputy Commissioner=> not exceeding Tk 500,000/- Asstt. Commissioner => not exceeding Tk 300,000/- Superintendent => not exceeding Tk 100,000/-

Adjudication of irregularity cases: Divisional Office In case of adjudication involving penalty only-

Divisional Officer--- full authority “value of goods” does not include the value of conveyance

Adjudication process Case in writing Issuing of show-cause notice (SCN) in writing Personal hearing [Sec 37(5)] Issue adjudication order Opportunity of summary adjudication.

Dispute settlementAdministrative process

• Commissioner VAT (particularly for value approved by divisional officer)• Valuation Review Committee (Constituted by NBR)• National Board of Revenue

Judicial Process Commissioner Appeal within (3+2 months)

Copyright @ Lutfor

Appellate Tribunal (3 months) High Court / supreme Court & Tax Ombudsman

Appeal Authority Appeal to Deposit

UP to Add. Com. Com. Appeal 10% of the demanded Commissioner Tribunal Duty, if not 10% ofCom. Appeal Tribunal the fine (09)Tribunal High Court noTime period for application 3 (three) MonthsOnly Com. Appeal can permit another 2 (two) more months

Appeal decision should be given within 9(nine) months otherwise the appeal shall be deemed to have been granted by the appellate authoritySec – 42

5. Record KeepingRecord Keeping and Accounting in VAT

Importance of record keeping in VAT Account or Record based tax system Audit based Payment & Credit not acceptable without record or documents Tax Liability determination Legality

Characteristics of VAT as a tax system

VAT is livable at every stage of value addition Self assessment system Accounting & Audit based Credit mechanism functions Business friendly & helps industrialization

Keeping records Legal Requirement, sec-31, rule - 22 When and how long?

- From the time of job 4 (four) years Sec-33 In case of undecided cases till the final disposalRecord keeping (mainly)Every manufacturer has to maintain the following Breaks of Accounts:

• Purchase register (Mushak-16)• Sales register (Mushak-17)• Account Current register (Mushak-18)• Treasury Challan• Invoice or Challan book (Mushak-11)

Copyright @ Lutfor

• Return (Mushak-19Record KeepingNature of Business

Register Records/Documents

a) Producer

1) Purchase 1)Purchase of goods & Services

2) Sale 2) Supply of goods & Services

3) Account Current 3) Treasury challen

4) Musuk-11 4) Return copy

5) Input 5) BoE copy

6) Production 6) Credit & debit note

7) Export Shipping Bill

b) Service1) Purchase 1)Purchase of goods & Services2) Sale 2) Supply of goods & Services 3) Musuk-11 3) Treasury challen4) Input 4) Return copy5) Production 5) Import & Export BoE copy

6) Credit & debit note7) Export Shipping Bill

c) Commercial Importer

1) Purchase 1)Purchase of goods & Services2) Sale 2)Goods Seal 3) Account Current 3) Treasury challen4) Musuk-11 4) Return copy

5) Import & Export BoE copyD) Turnover 1)Purchase & Sale 1) Return (Musuk - 11) 2)Annual

declaration 3) Registration no.& cash memo

Commercial documentsBooks of Account or files or any documentationExample- debit- credit voucher, cash memo, daily sale, purchase accounts, cash book, Primary & journal book, Ledger, bank account, Financial statement &

Copyright @ Lutfor

Analysis, Profit & Loss account, profit & loss appropriation account, Bank account reconciliation & balance sheet & all related documents including Audit reportsVAT Accounting and Payment Procedures: Procurement of inputs

Entry (+) in the Purchase Register Entry (+) in the A/C Current Register for input credits

Using inputs Entry (-) in the Purchase Register

Manufacturing outputs Entry (+) in the Sales Register

Supplying goods/ Rendering Services Entry (-) into the Sales Register

Issue Invoice From the VAT Challan Book

Payment/ Adjustment of duty Entry (-) in the A/C Current Register for output tax

Delivery of Goods/ Services Books of records

Account Current register – M (18) What is account current?

An account maintained with the commissioner by a registered person in aspecified form in which detailed of purchase, sales treasure deposits, payable &creditable VAT & where applicable, other taxes shall be entered.

Who maintains this account and how? VAT Registered person

A/c system is a method of paying VAT payable on a supply in advance to the govt. treasury.

Books of recordsVAT Return- Mushak-19

- Submission of return- When and how?

Period: Normally within 15 of the following monthInsurance – 20 daysSubmit Monthly Return to the circle office (M-19) within 15 10 working days of the following month.Tax periods Tax periods

3 months for Goods & services 1. Bricks 2. Indenting firm 3. Shipping agent 4. 100% exported oriented garments industries & deemed exporter

6 months for Exporter & Services Construction firm Clearing & forwarding firm

Copyright @ Lutfor

Consultancy & Supervisory firm Procurement provider

Disputes Valuation regarding losses Valuation in case of devaluation of money Registration Criteria Cancellation/Amendment/Change of registration Research Pressure group

What is needed Check/Examination of return Compare between return & value declaration Statistic (revenue) should be based on return Risk management (Ex.4:1 checking) Unit profile Skilled Officer Change of attitude Voice or Massage

An Overview of VAT

Copyright @ Lutfor