e_Paper, Monday, May 8, 2017

Opinion 15
DT
MONDAY, MAY 8, 2017
What the new VAT law means for us
With the new VAT law, Digital Bangladesh doesn’t seem that distant anymore. This is the first part
of a two-part op-ed
• Mamun Rashid
The Value Added Tax
(VAT) and Supplementary
Duty Act, 2012 (new VAT
law), was planned to be
implemented last year. However,
it was put on hold amidst a lot
of uncertainty and resistance
from stakeholders and, primarily,
unpreparedness on the part of
the government and the business
community.
Over the last year, the
government has been
concentrating all its efforts on
building the IT infrastructure
for the implementation of its
envisioned online VAT project --
the backbone of the new VAT law.
For smooth implementation of
the new VAT law, the government
has also initiated various measures
to dispel any confusion within
the business community at large
through television and newspaper
advertisements, social media
updates, radio broadcasts, etc.
As a result, the government
seems confident and is determined
to implement this new VAT law
with effect from July 1.
The move has been further
confirmed by the chairman
other benefits, some of which are
discussed below.
Going online
NBR has introduced a new
dedicated website for VAT
registration, payment of VAT, and
filing of returns. Unlike current
manual system the online system
will allow a business entity to
carry on its day-to-day VAT
compliances from the convenience
of its office or home through the
VAT website.
As a result, by eliminating the
hassle of going to the VAT office,
the online system will allow
businesses to enjoy huge savings
in time and cost which could be
invested in doing business in a
more professional and compliant
manner.
The process of registration
under the new act has already
commenced. Under it, existing
VAT registered entities as well as
new business entities are required
to obtain Business Identification
Numbers (BINs) before the
implementation date.
Making advance payments
Under the current VAT law,
companies are required to deposit
The new VAT law aims to initiate the
modernisation and digitisation of
the tax system in Bangladesh
Paying tax will become much easier from now on
BIGSTOCK
of National Board of Revenue
(NBR), at the pre-budget meeting
held on April 4, 2017, where he
expressed the government’s
commitment to implement
the new VAT law with all the
amendments, modifications,
and recommendations received
from all business communities,
chambers of commerce,
professionals, and economists.
The new VAT law aims to
initiate the modernisation and
digitisation of the tax system in
Bangladesh.
The transition from a manual to
a virtual VAT administration will
assist in overcoming bureaucratic
hurdles that businesses currently
have to deal with under the
present VAT system.
Other than simplifying the
multiple VAT rates into one
standardised rate, ie 15%, the
new act has also introduced
tax in advance (before supply)
and, therefore, always required
to maintain a positive balance
in their current account register.
In contrast, under the new law,
companies will only have to make
payments once they are due, ie
before the filing of their monthly
returns by the 15th of the next
month.
This will grant a registered
entity time from 15 to 45 days to
make the payment of VAT for the
supply affected by it in a month.
This will, in turn, improve a
registered entity’s cash flow and
provide relief on the working
capital requirement.
Refund of unutilised input tax
Currently, there is no provision
on the refund of unutilised input
tax credit unless the registered
entity cancels or surrenders its
registration.
Any excess unutilised input
tax credit needs to be indefinitely
carried forward and adjusted
against the output tax in the
following tax periods.
This becomes an unnecessary
hurdle for a business entity to
liquidate its working capital
blockage.
The new VAT law has a
provision for availing of the option
of refund of excess input tax
credit upon completion of carry
forward up to six months. This
will provide great relief to the
business community and will have
a positive impact on the cash flow
of businesses.
Valuation and levy of VAT
At present, manufacturers are
required to include all their cost
and overheads in the sale price for
determination of price on which
VAT is payable, thus precipitating
challenges in fixing the price in
the competitive market. The new
VAT law allows manufacturers
to discharge VAT only on the
transaction value (sale price),
regardless of whether cost price is
higher than sale price. This change
will give a competitive edge to the
business community.
Revised return
The present VAT law does not
provide any scope for correction in
the original return by the filing of a
revised return.
However, under the new VAT
law, a registered entity is now
allowed to file a revised return
after identifying any discrepancy,
omission due to clerical error, or
any other error except forgery
either online or manually, thus
resulting in reduction of disputes
as well as penalties imposed by the
VAT Authority.
Bad debts
Where a payment from a customer
remains outstanding for over 12
months and gets written off for
non-collection, the tax paid at
the time of supply becomes a cost
with no provision in the present
VAT law to adjust the same. Under
the new VAT law, the supplier will
be allowed to make a decreasing
adjustment, which will in turn
lower the amount of tax payable
by the supplier. •
The concluding part of this op-ed
will be published tomorrow.
Mamun Rashid is the Managing Partner
at PricewaterhouseCoopers (PwC)
Bangladesh. This article has been
prepared with extensive help from Pulak
Saha (Partner, Indirect Tax) and Prabir
Mitra (Manager, Indirect Tax) from PwC
India and Sanjida Mithila, Analyst from
PwC Bangladesh.