Though all is set to scrap the package VAT facility from July 1 next, the revenue board is out to exclude the businesses having sizeable turnover from the special facility and make them pay VAT at regular rate of 15 per cent. The objective is to beef up revenue as much as possible, in the short-term.
Tax officials have found majority of the shops, including the big ones, are enjoying package VAT system, paying the value-added tax at the rate for common shops at 4.0 per cent.
Many of the businesses across the board are currently enjoying the special package on VAT despite the bigger ones having significant amount of value addition, they said.
The government introduced the package VAT as a business incentive for small retailers and traders to pay a lump-sum amount as the tax fixed by the NBR on their annual value addition.
In a recent meeting of Budget Implementation Forum (BIF), the National Board of Revenue (NBR) decided to put those businesses in the regular VAT-payment structure.
The package system is likely to be scrapped with effect from July 1, 2016 with the enforcement of the new VAT and Supplementary Duty Act 2012. From July 1, all businesses will be brought under 15 per cent flat VAT rate. However, there will be 'input credit' system for the businesses that will reduce tax incidence for the businesses.
The NBR instructed its field offices to bring the large shops under normal rate from the package VAT as a move preparatory to the implementation of the new VAT law.
There are 2.5 million shops throughout the country. However, the NBR has yet to compile data as to how many businesses are enjoying the package-VAT system.
Talking to the FE, commissioner of Dhaka South Customs, Excise and VAT Commissionerate Kazi Mustafizur Rahman said the VAT officials had already taken steps to motivate shop owners in the city's posh shopping malls, including Bashundhara Shopping Mall and Rifles Square, towards the change.
Majority of the city's shopping malls, chain shops and other shops are under supervision of the south commissionerate.
"We presume most of the businesses under package VAT have the transaction volume and value addition to pay VAT at normal rate," he said.
The tax officials are now active in the field to make the businesses aware as per instructions from the NBR, he said. Bangladesh Dokan Malik Samity President SA Quader Keron also acknowledged that some large and wholesale businesses are illegally enjoying the pared-down rate of VAT meant for the small fry in business.
"Package VAT carries the lowest rate for small businesses. Large and medium-scale businesses are not entitled to enjoy the facility," he said.
Mr Keron said the association leaders are with the government to catch large and medium-scale businesses onto regular VAT net.
A senior VAT official of the NBR said shops having Tk 7,720 monthly value addition are entitled to enjoy the package VAT.
"We have identified some shops paying Tk 20,000 as rent of the spaces and have manifold higher value addition than that of the said amount but enjoying package rate of VAT," he said.
In the budget for FY 2015-16, the NBR has increased the package-VAT rates for businesses.
The package VAT for the retailers and small traders under Dhaka and Chittagong city corporations has been increased to Tk 14,000 from Tk 11,000 while the package VAT has been increased to Tk 12,000 from Tk 8,000 for those in other city corporations. And Tk 7,200 and Tk 3,600 have been set for municipalities and other areas of the country respectively.
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