Value Added Tax (VAT) is an indirect tax which is imposed on goods and services at import stage, manufacturing, wholesale and retails levels. It is also known as consumption tax which is paid by the final consumer or buyer. In Bangladesh, VAT is regulated by the Value Added Tax Act, 1991 under the National Board of Revenue.
Value Added Tax (VAT) is levied or charged whenever there is some value addition to raw materials. The taxpayers will get credit for the amount of tax paid off at the stages of procurement. VAT is imposed on producer, manufacturer, importer, exporter or service render under the Value Added Tax Act, 1991, on goods or specified services, at the rate of 15% at every stage of transfer.
The main features of VAT in Bangladesh are as follows:
(a) VAT is imposed on goods and services at import stage, manufacturing, wholesale and retails levels;
(b) A uniform VAT rate of 15 percent is applicable for both goods and services;
(c) 15 percent VAT is applicable for all business or industrial units with an annual turnover of Taka 2 million and above;
(d) Turnover tax at the rate of 4 percent is leviable where annual turnover is less than Taka 2 million;
(e) VAT is applicable to all domestic products and services with some exemptions;
(f) VAT is payable at the time of supply of goods and services;
(g) Tax paid on inputs is creditable/adjustable against output tax;
(h) Export is exempt;
(i) Cottage industries (defined as a unit with an annual turnover of less than Taka 2 million and with a capital machinery valued up to Taka 3,00,000) are exempt from VAT;
(j) Tax returns are to be submitted on monthly or quarterly or half yearly basis as notified by the Government.
(k) Supplementary Duty (SD) is imposed at local and import stage under the VAT Act, 1991. Existing statutory SD rates are as follows:
A. On goods: 20%, 35%, 65%, 100%, 250% & 350%
B. On services: 10%, 15% & 35%.
Value added tax (VAT) system in Bangladesh provides special treatment to the small companies and firms. According to the rules, small manufacturers and services providers whose annual turnover is less than 1.5 million taka is exempted from VAT but they are entitled to pay turnover tax @ 2 per cent. Such turnover tax can be paid either at a time or on quarterly basis. But they are not entitled to get tax credit benefit of their input taxes.
Like many others, the National Board of Revenue (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.