This one happens to be a classic example of how huge revenue is suspected to be evaded. One Jabbar Ali sought electronically generated invoice after buying two whole grilled chickens from a restaurant but eventually had to receive manual one.
The salesman at the counter of the GFC restaurant, located in Dhaka's Topkhana Road area expressed his inability to issue electronic invoice as the device remained out of order during the last two weeks.
"I had to accept the manual invoice from the shop, with a grain of suspicion over deposit of my paid VAT with the public exchequer," Mr Jabbar told the FE.
He suspects whether the shop owner wilfully made the device inoperative to evade VAT that has been collected on the product.
He is not alone -- there are hundreds of thousands among the conscious citizens who are being compelled to receive manual chalan for not having available electronic devices in shops.
In contrast, there are many consumers who have yet to be aware of the need to seek an electronic invoice after purchasing products from retail outlets, putting the government's revenue authority in difficulty to ensure electronic transaction of VAT or value-added tax in their bid to get to the goal of revenue generation for funding the national budget.
Many of the EFDs, installed under the first phase by the government, are learnt to have started malfunctioning as the VAT authority has found those having outdated specifications with many missing features.
Also, some unscrupulous businesses have refrained from using the government-provided Electronic Fiscal Devices (EFD), in connivance with some VAT officials, in a bid to conceal actual sales and evade the tax they collect from consumers, sources said.
"NBR received allegations that some of the machines were out of order and some of them were due to failure to properly maintain by the vendors as part of their responsibility while some were intentionally damaged or made inoperable," said Dr Moinul Huque, Member, VAT Implementation of the National Board of Revenue.
For addressing the problems, the NBR, in August 2023, signed an agreement with Genex Infosys, a local publicly listed company, to support the uphill task of EFD implementation.
The company will install these machines at its own cost, for which it will get a commission of 0.53 per cent on Tk100 VAT collection.
"The new vendor will install and take care of their maintenance free of cost and motivate both customers and retailers so that all sales are recorded. Genex has its own incentives as the sales increase will increase their share of commission and add up to their profits," said Dr Moinul.
Overall, the NBR considers the new EFDMS (EFD Management System) through partnership with a private company as the most appropriate alternative to overcome the previous setbacks and get every party onboard, he added.
"NBR made the contract with Genex Infosys through a transparent tender process where five companies participated," he said, dispelling any possible doubt over its recruitment process.
Genex Infosys would manage the EFD supply, installation and implementation activity.
When contacted, none of the company could be reached for comment on their part in the business.
The existing 9500 EFDs installed by the NBR earlier, since 2019, would be replaced by the company along with installing in new businesses.
The NBR has a rough ride in implementing the electronic-device project since 2009 for digitizing VAT payment.
The NBR remained indecisive on its entire journey to install the electronic devices during the last 14 years, by constantly changing methods of device distribution, its specifications, automated systems and experimenting with different types of devices.
Once businesses were asked to purchase the devices on their own while at a phase it had distributed it for free for few businesses.
In course of the dithering, the NBR had struggled to make the system work -- once with ECR and later EFDs -- on its own initiative.
In 2009, the NBR made installation of ECR mandatory at shops in 11 categories, including hotels, restaurants, sweetmeat shops, department and general stores, jewelry, all shops at shopping malls in metropolitan areas, and medium and large wholesale and retail shops across the country.
After a decade in 2019, the revenue authority dropped the plan to provide ECR, after installing around 3,000 out of eligible 11,005 across the country, due to its manual-like operation as well as after-sales service issues.
However, the journey with the EFD also proved less effective after installation of around 10,000 devices due to its missing options, unavailability of battery and after-sales services by vendor.
"We have tried to check the VAT evasion in retail and wholesale businesses with our own efforts. But, with the existing resources it seems difficult," says a VAT official in the field level.
Considering the utmost need for domestic revenue mobilization to feed the cash-crunch economy, the NBR had no alternative but to outsource the EFD implementation, he said.
In the first phase, the company would install the device in Dhaka and Chattogram and later it would be expanded across the country, if the piloting proved successful, said Dr Moniul Khan.
The NBR had introduced the ECR model following success model of Turkey, South Korea, Poland.
Officials have said the money spent on account of commission to the company would come back with huge returns into the public exchequer.
Dr Ahsan H Mansur, Executive Director of the Policy Research Institute (PRI), says regular monitoring of VAT collection using the devices is important to make it successful.
He recommends checking increase or decrease in vat collection on the electronic device installed in businesses and taking prompt action on the basis of changes.
"Appointing a third party is not a bad idea given the NBR's limited capacity," says the economist.
The government has targeted collecting Tk 1.59 trillion as VAT in the current fiscal year, up from Tk 1.25 trillion of the corresponding year's actual collection.
Officials have said VAT collection from retail shops contributes only 2.5 per cent to the total collection of this tax now. Until November, the NBR's VAT collection had grown 17 per cent, thanks to inflationary pressures and intensified efforts of the VAT wing.
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