Handbook On VAT & SD Act 2012
Handbook on VAT & SD Act 2012 Updated Based on Finance Act 2019
An Overview ofVAT LawinBangladesh(Updated Based on Finance Act 2019)
An Overview of VAT Law in Bangladesh(Updated based on Finance Act 2019)1st PublishedFebruary 2020Copyright 2020 by A. Wahab & Co.Published BySulekha Library51, 51/A Purana Paltan, 5th FloorDhaka-1000, Bangladesh.All rights reserved. No part of this book may be reproduced in any form,except brief excerpts for the purpose of review, without written permissionfrom the publisher.Complimentary Copy. Not for Sale.ISBN: 978-984-94405-0-5
PreambleThis publication has been intended to give abrief overview of the Bangladesh VAT Law. Theinformation provided is of general nature andnot intended to address any specific industryor circumstances. Readers are requested toseek adequately qualified tax professionals toaddress specific tax situations.This document has been updated based onFinance Act 2019.
Contents1. About VAT & SD Act 201272. VAT Registration83. VAT Books and Records164. Input VAT Credit205. Advance Tax (AT) Exemption236. VAT Exemption for 100% Export Oriented Company257. Types of VAT Rates268. Withholding VAT / VAT Deduction at Source279. Filing VAT Return / Turnover Tax Return2810. Concept of Fair Market Value (FMV)3011. VAT Exempted Goods & Services3112. Interest & Penalty3213. Filing and Disposal of Appeal3314. VAT Refund for Diplomatic Mission / International Organization 3415. VAT Refund for Foreign Tourist3416. VAT Rates on Various Services3517. SD Rates on Services39
1. About VAT & SD Act 2012Previous VAT Act 1991 has been replaced with the VAT andSupplementary Duty Act, 2012 (VAT Act 2012) from 1 July 2019.The VAT Act 2012 was enacted by the Parliament in 2012 butdue to several administrative reasons and concerns raised bythe business communities, its enforcement had been delayed.Eventually with the Finance Act 2019, the VAT Act 2012 has beenmade effective from 1 July 2019.1.1.What is Value Added Tax (VAT)Value Added Tax or VAT is an indirect tax which is paidby a consumer through a registered person. VAT onparticular goods or service is determined on the basis ofvalue addition of the said goods.1.2.What is Supplementary Duty (SD)Supplementary Duty means additional duty that is addedwith conventional duty imposed by government at thestage of import, manufacturing, and supply of servicesinside Bangladesh.An Overview of VAT Law in Bangladesh7
2. VAT RegistrationVAT Act 2012 introduces a new guideline of Registration andEnlistment for the purposes of VAT and Turnover Tax respectively.Under the new requirements, business entities having turnoverexceeding BDT 5,000,000 will be required to enlist for TurnoverTax and entities having turnover exceeding BDT 30,000,000 willbe required to register for VAT.2.1.Definition of TurnoverVAT Act 2012 defines turnover as all money received orreceivable against the supply of taxable goods or therendering of taxable services by means of their economicactivities. For the purpose of assessing the eligibility forRegistration and Enlistment, Turnover shall not include: The value of an exempted supply, The value of sale of a capital asset, The value of supply made as a consequence ofpermanently closing down an economic activity, The value of sale of an organization of economicactivities or portion thereof.2.2.VAT Registration ThresholdTurnover from BDT 5m to 30m are liable for enlistment asturnover tax payer unless there is specific instruction bythe government to get VAT registration.VAT registration must be obtained if Turnover is BDT 30million and above.8An Overview of VAT Law in Bangladesh
2.3.Mandatory registration requirementManufacturer, Importer, Exporter, Participating in tender/contract, Supplier of Supplementary Duty imposedgoods, Withholding Entity irrespective of turnover arerequired by the Act to obtain VAT registration.According to General Order (GO) no. 17/Mushok/2019of Section (6) of VAT and SD Act-2012, NBR has orderedthe following organizations to be registered irrespectiveof annual turnover.Heading No.H.S CodeGoods/Services04.01-04.04Applicable H.S CodeDairy Products11.08Applicable H.S CodeStarch13.01, 13.02Applicable H.S CodeGum17.02Applicable H.S CodeGlucose and Dextrose17.03Applicable H.S CodeMolasses17.04Applicable H.S CodeLozenge /Chewing Gum18.06Applicable H.S CodeChocolate19.02Applicable H.S CodeNoodles & Others Food Items19.05Applicable H.S CodeBiscuit, Chanachur, Others FoodItems20.07Applicable H.S CodeJam & Jelly21.03, 21.06Applicable H.S CodePickles & Sauce25.07Applicable H.S CodeChina Clay25.21-25.22Applicable H.S CodeLime25.15, 68.02Applicable H.S CodeMarble Stone28.24Applicable H.S CodeLead Oxide28.33, 33.07Applicable H.S CodeAlum28.39Applicable H.S CodeSodium Silicate29.05Applicable H.S CodeGlycerin29.15Applicable H.S CodeAcetic Acid29.33Applicable H.S CodeMelamine30.1-32.12Applicable H.S CodeAntiseptic, Disinfectant &Medicine32.07-32.12Applicable H.S CodePigments, Varnish, PolishesAn Overview of VAT Law in Bangladesh9
Heading No.H.S CodeGoods/Services32.15Applicable H.S CodeAll Types of Ink34.01-34.02Applicable H.S CodeAll Types of Soap Including LiquidSoap34.02Applicable H.S CodeDetergent36.05Applicable H.S CodeFirebox38.08Applicable H.S CodeMosquito Coil39.21Applicable H.S CodeFoam39.23Applicable H.S CodePvc Pipe/Plastic Container39.26Applicable H.S CodePlastic Goods40.11-40.13Applicable H.S CodeTire Tube40.16Applicable H.S CodeRubber Product42.02-64.03Applicable H.S CodeLeather Goods44.09-44.21Applicable H.S CodeWooden Goods44.1Applicable H.S CodeParticle Board48.1Applicable H.S CodeInsulation Board44.11Applicable H.S CodeHardboard44.12Applicable H.S CodePlywood47.03-47.05Applicable H.S CodePulp48.18Applicable H.S CodeToilet Tissue/Tissue Paper/Sanitary Napkin48.19Applicable H.S CodePackaging Materials51.05Applicable H.S CodeWoolen Fabrics52.05Applicable H.S CodeCotton Yarn52.08Applicable H.S CodeCotton Fabrics54.04Applicable H.S CodeSynthetic Fiber56.07Applicable H.S CodeNylon Cord56.08Applicable H.S CodeFishing Net59-62Applicable H.S CodeKnitted and Crocheted Fabrics /Socks /Readymade Garments68.05Applicable H.S CodeSand Paper68.11Applicable H.S CodeAsbestos69.05-69.14Applicable H.S CodeAll Types Of Bricks10An Overview of VAT Law in Bangladesh
Heading No.H.S CodeGoods/Services69.03Applicable H.S CodeCarbon Rod69.05-69.14Applicable H.S CodeAll Types of Ceramic AndPorcelain Made Goods70.13Applicable H.S CodeGlassware72.04Applicable H.S CodeScrap72.10-73.26Applicable H.S CodeAll Types of MS Products72.18Applicable H.S CodeSteel Ingots72.25Applicable H.S CodeStainless Steel73.2Applicable H.S CodeLeaf Spring73.24Applicable H.S CodeSanitary Ware73.17, 74.15,76.16, 79.07Applicable H.S CodeNails74.08-76.05Applicable H.S CodeCopper & Aluminum Ware76.04-76.06Applicable H.S CodeAluminum Fittings76.07Applicable H.S CodeAluminum Foil78.01Applicable H.S CodeLead Ingots82.08Applicable H.S CodeBlade83.11Applicable H.S CodeWelding Electrode84.14Applicable H.S CodeElectric Fan & Its Spare Parts84.16Applicable H.S CodeGas Burner84.15, 84.16,85.09, 85.16,85.28, 85.29Applicable H.S CodeAir Conditioner, Refrigerator,Television & Other ElectronicsGoods85.04Applicable H.S CodeElectric Transformer85.06, 85.07Applicable H.S CodeDry Cell Battery & StorageBattery85.07Applicable H.S CodeBattery Separator85.28Applicable H.S CodeTelevision85.39Applicable H.S CodeElectric Bulb87.14Applicable H.S CodeBicycle PartsAn Overview of VAT Law in Bangladesh11
HeadingNo.ServiceCodeS001S001.10Hotel (Unless Exempted By SRO)S001.20Restaurant (Unless Exempted By SRO)S002S002.00Decorators & CaterersS003S003.10Motor Car Garage & WorkshopS003.20DockyardS004S004.00Construction FirmS005S005.10WarehouseS005.20Port For Import/ExportS006S007.00Advertising FirmS008S008.10Printing PressS009S009.00Auction FirmS010S010.10Land Development OrganizationS010.20Building Construction OrganizationS012.10S012.14Telephone, Teleprinter, Telex, Fax or InternetOrganizationS012.20Sim Card DistributorS013S013.00Automated LaundryS014S014.00Indenting FirmS015S015.10Freight ForwardersS015.20Clearing & ForwardingS017S017.00Community CenterS018S018.00Film StudioS020S020.00Survey FirmS021S021.00Plants or Capital Machineries Rental FirmS022S022.00Sweet ShopS023S023.10Cinema HallS023.20Film ProducerS024.10Production Of FurnitureS024.20Sales Center Of FurnitureS026.00Goldsmith, Silversmith & Trader Of Gold &SilverS012S024S02612ServicesAn Overview of VAT Law in Bangladesh
HeadingNo.ServiceCodeServicesS027S027.00Insurance Company (Except Exempted By SRO)S028S028.00Courier & Express Mail ServicesS030S030.00Beauty ParlorS032S032.00Consultancy & Supervisory FirmS033S033.00LessorS034S034.00Audit & Accounting FirmS035S035.00Shipping AgentS036S036.10Ac Bus ServiceS036.20Ac Launch ServiceS036.20Ac Train ServiceS037S037.00Procurement Provider (Unless Exempted BySRO)S038S038.00Organizer of Cultural Programs With ForeignPerformerS039S039.10Satellite Cable OperatorS039.20Satellite Channel DistributorS040S040.00Security Service ProviderS043S043.00Programs Broadcasting Through Television orOnline TelecastS046S046.00Health Club & Fitness CenterS047S047.00Sports OrganizerS048S048.00Transport Contractor (Without Food AndCrops Transport)S049S049.00Transport Rental ServiceS050S050.00Architect, Interior Designer/Interior DecoratorS050.20Graphics DesignerS051S051.00Engineering FirmS052S052.00Sound & Light Instruments Rent ProviderS053S053.00Attending Board MeetingS054S054.00Advertising Through Satellite ChannelS056S056.00Banking & Non -Banking Service ProviderAn Overview of VAT Law in Bangladesh13
14HeadingNo.ServiceCodeS057S057.00Electricity Supplies (Without Supplying inIrrigation and Cold Storage Service )S058S058.00Chartered Airplane or Helicopter Rental FirmS059S059.00Glass Sheet PlanterS060S060.00Buyer of Auctioned GoodsS061S061.00Credit Card Service ProviderS062S062.00Money ChangerS063S063.00Air Conditioned Tailoring Shop and TailorsS064S064.10Amusement & Theme ParkS064.20Picnic Spot, Shooting SpotS065S065.00House, Floor, Space Cleaning & MaintainingS066S066.00Lottery Ticket SellerS067S067.00Immigration ConsultantS068S068.00Coaching CenterS071S071.00Event ManagementS072S072.00Human Resource Supply or ManagementS074S074.00Rent of Office or Building For CommercialPurposeS076S076.00Social & Sports Related ClubS078S078.00Sales Center of RMG ProductsS080S080.00Ride SharingS099S099.10IT Enabled ServicesS099.30Sponsorship ServiceS099.50Credit Rating AgencyS099.60Online Goods SaleServices2.4.Central registration requirementSupply of identical goods /Services, similar goods /services from different places and maintain books ofaccounts centrally can apply for central registration.2.5.Unit registration requirementPerson engaged in the business of different types ofAn Overview of VAT Law in Bangladesh
products / services from different places is required toobtain unit registration.2.6.Voluntary VAT RegistrationAny person, making a taxable supply in the process ofeconomic activities whoare not required to be registered,may voluntarily make an application to the Commissionerfor VAT registration.2.7.Documents required for registrationThere are requirement of some documents to uploadin the VAT online system while processing for VATregistration. Application in Mushok-2.1 needs to be filledup along with the following documents as applicable forthe person. Memorandum and Articles of Association Trade License BIDA Permission (in case of Liaison Office, Branchoffice and Manufacturing) Certification of Incorporation (RJSC) E-TIN of the Company E-TIN of the Company Shareholder NID/Smart card for local share holder Passport of Owner (if 100% Foreign ownership) IRC (in case of Importer) ERC (in case of Exporter) List of Capital Machinery (in case of ManufacturingCo) Plan Layout (in case Manufacturing Co) Latest Bank Statement H.S Code of outputs and Inputs (in case ofManufacturing Co) Taxable turnover in past 12 months periodAn Overview of VAT Law in Bangladesh15
3. VAT Books and RecordsVAT Act 2012 requires VAT registered person to maintain recordsand accounts for 5 years. 100% export oriented company willmaintain records for 3 years. In case of unsettled dispute allrelevant documents and records need to be maintained untilsettlement of disputes.3.1.16Basic VAT books and recordsInput-output co-efficient form - Mushok-4.3 - Registeredpersons are required to file Input-Output CoefficientDeclaration in Mushak Form 4.3. Input-Output CoefficientDeclaration should be filed with the VAT Authority throughonline system or concerning divisional VAT official 15days prior to the date of supply. No approval is requiredfrom the VAT Authority. Revised declaration required ifinput price, value addition, sales prices changes by moreor less than 7.5% Purchase Register - Mushok-6.1 Sales Register - Mushok-6.2 In case of Trading business - Maintain Sales &Purchase Register combinedly in the prescribedform - Mushok-6.2.1 VAT Challan– Mushok 6.3 (Two copies. No need tosubmit to VAT office) Centrally registered person will issue Goods TransferChallan in prescribed form Mushok 6.5 Production through Sub contract – Mushok 6.4 when raw material will be issued byowner. Mushok 6.4 to be issued by sub-contractor whencontractual goods will be produced and to bedelivered to owner of the goods. At the time of delivery of finished goods subcontractor will also issue Mushok Challan in Mushok6.3 VDS Certificate – Mushok-6.6 Credit Note – Mushok-6.7 Debit Note – Mushok-6.8An Overview of VAT Law in Bangladesh
Sales and purchase of more than Tk. 200,000 shouldbe reported in prescribed form in Mushok-6.10 alongwith VAT Return or before submission of VAT returnVAT Return– Mushok 9.13.2.Requirement of Software based books and recordsIn case of turnover 5 crore or above, VAT Books andrecords should be maintained in the NBR approvedVAT software. Computer generated challan, purchaseregister, sales register, debit note, credit note, VAT returnetc. should be printed on daily basis and signed byappropriate authority and maintain the hard copies for 5years from the end of the tax period3.3.Tax Invoice (Mushok 6.3)Every registered supplier is required to issue two copiesof serially numbered Tax Invoice (Mushok Challan)onor before the date when VAT becomes payable on thetaxable supply containing the following information,namely:–a) the date and time of issue of the invoice;b) the name, address and Business IdentificationNumber of both the supplier and the buyer if thesupply value is greater than BDT 25,000;c) description of the goods or services,d) quantity of the goods supplied;e) the value of the supply (exclusive of VAT and inclusiveof VAT);f)the VAT- rate applicable to the supply;g) the amount of payable VAT; andh) any other information prescribed by the Board.If supply is made from multiple locations, Tax Invoiceshould be made serial for each location. This numberalong with the name and address of the location shouldbe mentioned in the Tax Invoices for the supplies madefrom those locations.An Overview of VAT Law in Bangladesh17
3.4.Tax invoice in case of Progressive or Periodic SuppliesThe VAT Act 2012 defines “progressive or periodicsupplies” as any supply under contract, lease, hirepurchase or license (including finance lease) on thecondition of progressive or periodic payment ofconsideration. VAT imposed on such supplies becomespayable at the earliest of:a) when separate invoices are issued for each suchsupply;b) when consideration against each such supply isreceived in part or in full;c) when the price against the series of supplies becomespayable; ord) the first day of the tax period to which the payableconsideration relates, if it is possible to ascertain thepayable amount at that time.Where a supply of any good is made under a lay-byagreement‚ separate tax invoices shall be required to beissued against payment of each installment.3.5.18Use of software at various business shopsValue Added Tax and Supplementary Duty Rules -2016,Rule- 118Ka, requires following business organizationsituated in City Corporation, District level having annualtaxable turnover more than 50 lac to use software likeas Electronic Fiscal Device(EFD), Sales Data Controller(SDC), Point of Sales(POS). These are as follows: Residential Hotel Restaurant & Fast-food Shop Decorators & Caterers Motor Car Garage & Workshop Dockyard Advertising FirmAn Overview of VAT Law in Bangladesh
Printing Press Community Center Sweet Shop Goldsmith, Silversmith And Gold & Silver Trader Sales Center Of Furniture Courier & Express Mail Service Beauty Parlor Health Club & Fitness Center Coaching Center Social & Sports Related Club Sales Center Of Rmg Departmental Store Super Shop Electric Laundry Cinema Hall Security Service All Business Organization Including Shopping Mall Goods or Service as determined by NBR.An Overview of VAT Law in Bangladesh19
4. Input VAT CreditA registered person shall be entitled to input VAT credit fortaxable import and taxable supply made to person for conductingtheir economic activities except following areas.ZZ Purchase of inputs exceeding Tk. 100,000 which is paidwithout banking channelZZ In case of receiving imported services, if VAT payable onsuch service is not shown in the VAT returnZZ If VAT rebate not taken by next two tax periodZZ If goods or services are in the possession of other personZZ If purchase of goods or services not included in thepurchase registerZZ If BIN, address and name of seller and purchaser are notmentioned in the VAT ChallanZZ If Bill of Entry number is not mentioned in the VAT Challanin case of purchase of goods from importer or if there isany discrepancy between VAT Challan and Bill of EntryZZ Goods released through Bank GuaranteeZZ Input used for VAT exempted productZZ Turnover taxZZ Supplementary duty paid on production of goods andservicesZZ VAT rebate not allowed in case of output VAT which issubject to less than 15%ZZ Inputs not shown in input-output coefficientZZ Import of spare parts / repair or maintenance relateditems related to public transport not qualify for rebateunless the economic activity of the person includes thebusiness of transport service or rent a car serviceZZ Import of entertainment related items not qualifyfor rebate unless the economic activity of the personincludes the business of entertainmentZZ If the VAT paid for membership sports, social orentertainment club20An Overview of VAT Law in Bangladesh
In addition, following items will not qualify as input while takinginput credit:ZZ Land, building, office equipment, machinery, furniture &fixture, extension, modernization, repairZZ All types of office supplies, stationeries, refrigerator,freezer, generator purchase and maintenanceZZ Interior designZZ Car rental or leaseZZ Entertainment, refreshment, workers welfare, workersdevelopment related workZZ Office / show room rent by whatever name called.4.1.Documents needed for input tax credit In case of an import, a bill of entry bearing the nameand the BIN No. of Importer, For supply, a tax invoice (Mushok 6.3) issued by thesupplier For withholding entity, a combined tax invoice andwithholding certificate issued by the supplier In case of purchase from an importer, the B/E No.and Description of goods in Mushok 6.3 will be thesame as in B/E Name, Address and BIN of both Seller and Buyer tobe written in Mushok 6.34.2.Time limit for input tax creditEvery claim of an input tax credit by a registered personshall be made either in the tax period in which VAT is paidor within the two succeeding tax periods, and such claimof input tax credit thereafter shall be time barred.4.3.Credit of Advance Tax paid at importImporters are required to pay Advance Tax at 5% (exceptwhere NBR has given exemption) on taxable imports onthe value determined for taxable imports. Such AdvanceTax can be shown as decrea
8. Withholding VAT / VAT Deduction at Source 27 9. Filing VAT Return / Turnover Tax Return 28 10. Concept of Fair Market Value (FMV) 30 11. VAT Exempted Goods & Services 31 12. Interest & Penalty 32 13. Filing and Disposal of Appeal 33 14. VAT Refund for Diplomatic Mission / International
A Practical Guide to Reverse VAT 1. Contents 2. What is Reverse VAT? 3. Will Reverse VAT affect your business? 4. What is an End User? 5. Commercial End Users 6. Domestic End Users 7. When will Reverse VAT begin? 8. The Current VAT System 9. The New Reverse VAT System 10. Construction services subject to Reverse VAT 11. What else does Reverse VAT apply to? 12. Services NOT subject to .
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