Uncertainty grips new VAT law launch

Doulot Akter Mala | Published: May 15, 2016 00:00:00 | Updated: February 01, 2018 00:00:00

Field officials are in doubt about the enforcement of the new VAT law from July 01, despite the finance minister's vow to push it through, as the groundwork is seen inadequate.
Moreover, trade chambers have sought modifications of its provisions, particularly the 15 per cent uniform VAT rate for all sizes of businesses.
Finance Minister AMA Muhith, on several occasions, expressed his resolve regarding enforcement of the Value Added Tax and Supplementary Duty (SD) Act 2012 from the first day of the coming fiscal year.
Many of field-level officials, preferring anonymity, claimed they were yet to get prepared to enforce the new law from the FY 2016-17 as per government plan.
They felt the need for adequate training on development of expertise, logistic support, and motivation of the stakeholders and running the new law on pilot basis for a specific time to help officials get accustomed to the new law for a smooth sail.Â Â
Although under the Value Added Tax (VAT) online project a series of motivational programmes were arranged for the VAT payers and training programmes for VAT officials, the field officials found it inadequate compared to the volume of technical applications of the new law.
"It would be difficult to maintain the current flow of revenue collection just after implementation of the new law by overcoming challenges in the transition period," said a senior VAT official.
Sources concerned said the different VAT commissionerates have submitted budget proposals for the financial year (FY) 2016-17 on the basis of current VAT law, framed in 1991.
Some of the commissionerates also have submitted their proposals on both the existing and the new VAT and SD law with a doubt as to which law would come into force from July 01, 2016.
Officials at the National Board of Revenue (NBR) said they were working on the existing VAT law and updating the Statutory Regulatory Orders (SROs).
To face challenges on implementation of the new law, the NBR has prepared a plan for the transitional period in line with the suggestions of the field-level VAT officials.
The legal transition from the existing to the new law may create some challenges for the tax authority or leave some impact on revenue collection.
A senior NBR official said the taxmen are exploring possibility to run two parallel systems, sorting out from the new law and existing law, so that businesses can avoid any untoward situation.
The Business Identification Number (BIN) and VAT return submission will be automated soon for the taxpayers even if the new law is not implemented, he said.
"It may create additional pressure of VAT payment for the businesses. If they pay VAT in truncated-base under the automated system, tax incidence will increase many times as there will be no scope for obtaining tax credit," he said.
In that case, the businessman can choose the new system where uniform rate of VAT at 15 per cent will be applicable with the opportunity of tax credit, he added.
The authority is planning that the two systems may work simultaneously if the new VAT law doesn't come into force from July 1, 2016.
VAT officials said the new VAT law will scrap the current account system. Treasury deposit may be reduced significantly at the beginning of the next fiscal. Â
On transition plan, the VAT official suggested opening separate rebate and treasury deposit account of the relevant companies, until finishing the current-account estimation, by completing audit of last five years. The field officials also proposed to allow use of the 11 digit business identification number (BIN), the existing one, until final disposal of demand through audit.
There will be no price-declaration system in the new law. The commissioners proposed that they must have a list with value of each item of last six months in a database to check false declaration of products. Under the new law, small businesses having annual turnover up to Tk 3.0 million will be exempted from payment of VAT. The field offices proposed that the companies should declare themselves as small businesses having the turnover limit by June 30, 2016 in a specific form to check abuse of the facility.
The VAT officials also suggested alternative monitoring system in case of withdrawal of tax stamp or bandroll system in the new law, including scrutinizing the stock of current bandroll.
The VAT authorities may be empowered to confiscate the bank account in case of use of another account by a VAT-registered company apart from the bank account that has been showed in the prescribed form for the business transaction, officials suggested.
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