Policymakers and stakeholders have recommended the government to frame clear guidelines for the private sector for implementation the new VAT law, after identifying the main reasons as to why the law could not be implemented and had to defer by two years.
They also suggested making the guidelines public to remove the existing confusions so that the investors could get a clear signal about a stable and consistent VAT policy and the government could avert repetition of postponement of the law.
The suggestions were made at a discussion on Budget for FY 2018-19 & Value Added Tax (VAT) Policies, organised by Business Initiative Leading Development (BUILD) at its premises in the capital on Tuesday.
In the budget speech for fiscal year (FY) 2017-18, there was an announcement for implementation of VAT & Supplementary Duty Act 2012 from July 1, 2017.
Later, the government backtracked from its stand following strong opposition from the businesses and deferred implementation of the law by two years to 2019.
Speakers at the meeting discussed about the dilemma over VAT Act 1991 and VAT & SD Act 2012, seeking a clear instruction for implementation of the VAT policies in Bangladesh.
They stressed the need for a clear diagnosis to identify the main reasons, gaps and problems before implementation of the new law.
A clear definition of VAT, addressing the discrimination of policies in different export sector for collecting tax at source, input tax rebate for utilities, minimum tax under ITO 82C/52 etc. were needed to be resolved, they added.
They found it necessary to facilitate implementation of the VAT online platform and utilise the benefit of automation.
The VAT collection in the first five months of this fiscal year fell 11.6 per cent short of the period's target, according to the NBR.
The private sector expressed concern over the VAT policies, specially imposing VAT on cottage and small Industries that constitutes more than 88 per cent of the total industrial enterprises in the country.
These small industries are suppliers of intermediate goods to a number of large enterprises. For them, paying VAT at 15 per cent would be very difficult, the meeting was told.
If new law takes effective from 2019, the speakers suggested taking preparation from now for addressing the SME issues.
A BUILD presentation raised several aspects of VAT and detailed the pros and cons, such as; rates of VAT, new system of VAT registration, registration for group of companies, differences between two VAT laws, highlighting the issues like price declaration and maintaining current account, etc.
The meeting also discussed about VAT on finished products those use VAT-free raw materials.
The issues like expansion of withholding tax-base from 39 to 105 (at local stage) and advanced income tax at import stage at 5.0 per cent came up for discussion, and the speakers recommended withdrawal of the measures to encourage investment.
The meeting specifically mentioned about the requirement of registration of VAT under e-Bin. Presently for VAT registration, two types of forms (2.1 & 2.2 for central and sister concerns consecutively) are used, confusing the VAT payers because new VAT act is not in operation now.
As per the earlier policy, VAT is to be paid separately for sister concerns as centrally payment of VAT is not in existence.
Whether Mushak-19 or Mushak- 9.1 for submitting the return is the final one is also not clear, the speakers pointed out.
They said it was also not clear whether the current account system is synchronised with iVAS system (which was designed for implementation of VAT & SD Act 2012), while NBR is presently following the VAT Act1991.
The business community is always concerned specially about SMEs those are worst sufferers in case of getting VAT rebate while explanation of law sometime confuses and that usually are always inclined to the decision of taxmen, the meeting was told.
Bill of lading (B/L) is the main instrument of getting VAT credit, but SMEs are hardly able to submit Mushak-11, thus getting input tax credit becomes very difficult for them.
The meeting also proposed to enhance the VAT exemption limit for small businesses from the present level to at least Tk 5.0 million.
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