The much-awaited Value Added Tax (VAT) and Supplementary Duty Act 2012 will come into effect from July 1, 2019 with four rates as per the finance minister's budget proposal placed on Thursday.
The new rates will be 5.0, 7.5, 10 and 15 per cent, according to the proposed budget for the upcoming fiscal year (FY), 2019-20.
Local traders have to pay VAT at a rate of 5.0 per cent. Businesses that will pay VAT at 15 per cent rate will get rebate of their paid VAT on raw materials. VAT returns will be treated as refund applications.
A VAT-free ceiling of up to Tk 5.0 million has been proposed in the budget for small businesses by scrapping the package VAT.
Businesses having an annual turnover ranging from Tk 5.0 million to Tk 30 million will enjoy turnover tax at a rate of 4.0 per cent.
In the budget proposal, a new Advance Tax (AT) at a rate of 5.0 per cent has been imposed on all imported products instead of Advance Trade VAT (ATV).
The VAT registration threshold has been increased to Tk 30 million from Tk 8.0 million.
The proposed budget has also abolished the existing price declaration system before supply of goods. From the upcoming FY, taxpayers will pay VAT on the basis of fair market price.
Currently, there is a provision of maintaining sufficient balance in the Account Current Register while supplying goods. However, according to the new law, there will be no such provision, and the businessmen will be able to pay tax at the end of month through VAT returns.
Considering the possibility of inflation, specific taxes have been fixed for some specific products, including MS rod and some services.
As a special measure, VAT in trading stage of pharmaceutical and petroleum products has been proposed at the rate of 2.4 per cent and 2.0 per cent respectively, considering sensitivity of the products.
The existing VAT exemption facility will continue in case of the government's priority and fast-track projects, such as projects under the Bangladesh Economic Zone Authority (BEZA) and the Public Private Partnership (PPP) Authority Bangladesh.
Heavy industries, like - automobile, refrigerator, freezer, air conditioner, motorcycle and mobile etc, will continue to enjoy the VAT exemption facility.
Considering the interest of poor and marginalised people, the budget has proposed to provide VAT exemption on production and supply of bread, hand-made biscuits and hand-made cakes valuing up to Tk 150 per kg.
Local supply of agricultural machineries, such as - power ripper, power tiller-operated seeder, combined harvester, low-lift pump and rotary tiller etc, will be exempted from payment of VAT.
Rent of a business showroom, run by women entrepreneurs, will also enjoy VAT exemption.
The exemption facility will be offered to suppliers of electricity in the Bangladesh Hi-Tech Park as well as suppliers of natural gas and electricity in case of investment in the BEZA units.
VAT exemption for investors of the PPP projects on procurement of services from construction firms, consultancy and supervisory firms, and legal advisors has been proposed in the budget.
VAT exemption for the Rooppur Nuclear Power Plant project on procurement of services from freight forwarders, clearing and forwarding agencies, insurance companies, suppliers and banking services has also been proposed.
Imposition of VAT on plastic and aluminium products, soybean oil, palm oil, sunflower oil and mustard oil has been proposed in the budget. These products have been enjoying the exemption benefit for a long time.
The finance minister also proposed imposing VAT on astrologists, marriage media services, and suppliers of entertainment programme, serial, drama, tele-film etc, to be broadcasted in television channels and online media like YouTube and Facebook.
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