National Board of Revenue (NBR) has estimated that steps proposed under the under the new VAT and Supplementary Duty Act-2012, if implemented, would fetch Tk 112.98 billion in additional revenue in the fiscal year (FY) 2017-18.
The additional amount would be equivalent to one-sixth of the revised VAT collection target of Tk 660 billion for the outgoing FY 2016-17.
The new law is scheduled to come into force from July 01, 2017 replacing the existing VAT Act of 1991.
The new VAT and SD law would scrap existing three major tax measures---tariff value, truncated-base, a set of exemptions on some products. Withdrawal of the tax benefit would help collect additional Tk 47.0 billion in VAT in the upcoming FY, according to an estimate of the VAT wing that was placed before the government high-ups.
The NBR has estimated the highest Tk 65.28 billion in additional VAT from re-fixation of price and SD on tobacco products.
The new law has imposed 15 per cent uniform rate of VAT on all sectors, exempting the small businesses and essential products.
With the withdrawal of the tariff value system, the government would receive additional Tk 25 billion VAT in the upcoming FY.
MS products, paper, river vessels, transformers, tissues, machine-produced bricks produced and some other products are currently enjoying tariff value on payment of VAT.
Under the tariff value, the NBR fixed a value on quantity of the products to help those sectors pay VAT at a reduced rate.
Truncated-base VAT or multiple rate of VAT is currently being enjoyed by the building construction companies, suppliers and land development organisations.
Scrapping the truncated-base VAT would bring additional Tk 12 billion as those sectors will have to pay VAT at a rate of 15 per cent, according to a NBR document that contains the estimate.
Fabrics, electricity, plastic and aluminium products, passenger bus and some MS products would not be entitled to enjoy VAT exemption under the new VAT law. The NBR estimated Tk 10 billion VAT from those sectors in FY 2017-18.
However, the VAT wing would lose Tk 84.35 billion with the increase of the threshold for turnover tax to Tk 15 million from Tk 8.0 million and offer VAT exemption to the small businesses having annual turnover up to Tk 3.6 million.
The existing VAT law-1991 has no exemption ceiling and currently all the businesses irrespective of their business turnover are under VAT net.
The NBR's study said the VAT department will have to collect additional Tk 214.51 billion in revenue to achieve its aggregate target of Tk 878.87 billion for the FY 2016-17.
The government set highest revenue target for the VAT wing among its three wings -- VAT, income tax and customs.
The board eyes a 12.5 per cent or Tk 83.05 billion as natural revenue growth for VAT wing.
The revised target for VAT collection has been set at Tk 660 billion for the current FY. However, the NBR hoped to surpass the revised target by collecting an additional amount of Tk 4.36 billion.
Officials said the new VAT law would introduce an automated system in business transactions and plug VAT evasion holes.
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