Main Features of VAT

(i)VAT is imposed on goods and services at import stage, manufacturing, wholesale and retails levels;
(ii)A uniform VAT rate of 15 percent is applicable for both goods and services;
(iii)15 percent VAT is applicable for all business or industrial units with an annual turnover of Taka 2 million and above;
(iv)Turnover tax at the rate of 4 percent is leviable where annual turnover is less than Taka 2 million;
(v)VAT is applicable to all domestic products and services with some exemptions;
(vi)VAT is payable at the time of supply of goods and services;
(vii)Tax paid on inputs is creditable/adjustable against output tax;
(viii)Export is exempt;
(ix)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;
(x)Tax returns are to be submitted on monthly or quarterly or half yearly basis as notified by the Government.
(xi)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%.

Tax Base for VAT:
Import Stage:
Customs Assessable Value + Customs duty + Supplementary Duty
Domestic/Local Stage:
a)Goods (manufacturing): [Production cost + Profit and Commission (if any) + Supplementary duty (if any)]

b)Services: [total receipts excluding VAT but including supplementary duty (if any)]

Truncated Base / Fixed Value Addition: In some of the cases of goods and services producers and sellers face difficulties in availing VAT credit/adjustment facilities due to non availability of invoices from the sellers of input. In order to remove this operational difficulty fixed bases such as 10%, 25%, 30%, and 60% value addition is taken into account for calculation of VAT for a number of goods and services. In such circumstances net VAT rate for different rates of value addition comes to 1.5%, 2.25%, 4.5% and 9%.

VAT at the wholesale and retail stage: In case of wholesalers and retailers, there is a special provision for a 1.5% percent VAT known as Trade VAT on the total sale, provided that the wholesaler/retailer do not avail the facility of input credit/adjustment. Such tax is also collected at the import stage from importers of finished goods as an advance trade VAT.

Tariff Value for imposition of VAT: Under the VAT Law, the government is empowered to fix Tariff Value for some items for the collection of VAT. Example: tariff value for mild-steel products produced from imported/locally procured re-rollable scraps is TK 4000.00 per MT. Normal VAT input credit is also not available under this system.

Deduction of VAT at source:As deduction at source is also practiced in case of VAT on certain services, Government, Semi-Government, Autonomous Bodies, NGOs, Banks, Insurance Companies and Limited Companies are authorized by the government to deduct applicable VAT on the services at source.

Excise Duty: At present excise duty applies to only two items: bank deposits and domestic air ticket (Tk. 250 per journey).