NBR revises VAT collection rule for banks' service charges

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Doulot Akter Mala
National Board of Revenue (NBR) has revised the VAT collection rule for the service charges of commercial banks that are charging less than the scheduled rate of Bangladesh Bank (BB), officials said.
The NBR has decided to deduct Value Added Tax (VAT) from service charges of commercial banks as per their respective scheduled rates, they said.
The taxmen have been collecting 15 per cent VAT as per scheduled rate of the central bank although a number of commercial banks' rates are much lower than the BB rate.
The banks have fixed maximum service charge rates but they have the discretionary power to charge less than the of BB rate.
The NBR recently took the decision mainly to help the commercial banks that are offering competitive service charges to bank clients.
The NBR already sent letters to the commercial banks informing them of the latest change in the existing VAT collection method.
There are around 45 commercial banks under VAT net of the government. They have been depositing around Tk 1.0 billion every year as VAT. Of them, 18 large banks have been paying nearly Tk 60 million (60 lakh) VAT under large taxpayers' unit (LTU) while rest of the banks pay Tk 30 million.
"The NBR has revised the rule for VAT deduction in line with the proposals of different commercial banks that are paying higher VAT as per BB's scheduled charge," a senior official of NBR told the FE Tuesday.
A number of large commercial banks including Standard Chartered Bank have been asking for long to rationalise the VAT collection procedures as per their service charges, he said
"The NBR will collect VAT on the service charges of all banks as declared in their respective schedules," said the official.
Some of the banks are offering free service or special concession to some services that are not be entitled to get the benefit, he said.
"VAT will be charged on the basis of regular service rates of banks. If any bank offers free service it will have to pay VAT as per its regular scheduled rate," he added.
Charges for the same service vary widely from bank to bank. Different banks are offering competitive charges for opening letters of credit (L/Cs), bank statements, beneficiary owner's account certificate, L/C advising, acceptance facilities, L/C transmission, issuance of back-to-back L/C certificates, C&F certificate etc.