15pc VAT on rented space, machinery imposed
Monday, 7 September 2009
Doulot Akter Mala
The government has imposed a 15 per cent value added tax on commercially rented space, establishment and machinery to boost revenue amid concerns that it would hike up cost of doing business in major cities.
The National Board of Revenue (NBR) issued the order earlier this month, making it effective from the first day of the current fiscal year.
The board said floor spaces of thousands of commercial buildings, establishments such as parks, telecom towers, convention and exhibition centers and machinery including generators and dredgers would come under the purview of the order.
The tax would be deducted from the tolls, fees, rent, charges and royalty that a tenant pays on commercially rented space, machinery or establishment, the board said.
The order will not be applicable for residential tenants or finally transferred or sold space, establishment or machinery, a senior VAT official clarified.
"The NBR has imposed the VAT only on commercially rented space, machinery and establishment. Flat and apartment owners don't have to worry about the order," he said.
Officials said the order was long due as major cities in the country have been witnessing a boom in renting business of commercial space, structures and machinery in recent years.
"We see the sector as one of the major revenue generating areas from where the board could collect at least Tk 5.0 billion VAT every year," the official said.
The sector remained unexplored until last fiscal. The government brought it under the VAT net as part of its intensified move to find out more sources of internal revenue.
Service sector has been growing faster than the country's Gross Domestic Product (GDP) rate over the last half a decade, but revenue collection from its major areas is still depressing.
The board said the 15 per cent VAT will be imposed on total exchange value of commercial space if there is an agreement to pay rent under this system.
The owners of commercial space will deposit the VAT to the government exchequer within three days after collection, it said adding tax can be paid in installment or after a specific timeframe.
The board would also compel the owners of commercial space to pay the tax from his actual received amount if he fails to collect the 15 per cent tax from his tenant.
Tenants will have to deposit the tax through treasury chalan if he does not belong to any government, semi-government, autonomous body or non-government organisation or unregistered in the VAT department.
A member of the country's apex chamber slammed the order, saying it would increase cost of doing business in major cities.
"It's illegal. The government cannot impose VAT on these service sectors. Rented space or hired machinery doesn't add any value," said Bangladesh shop owners association chairman Amir Hossain Khan. Khan said the NBR should have consulted apex trade body, FBCCI, before issuing this sweeping order.
The government has imposed a 15 per cent value added tax on commercially rented space, establishment and machinery to boost revenue amid concerns that it would hike up cost of doing business in major cities.
The National Board of Revenue (NBR) issued the order earlier this month, making it effective from the first day of the current fiscal year.
The board said floor spaces of thousands of commercial buildings, establishments such as parks, telecom towers, convention and exhibition centers and machinery including generators and dredgers would come under the purview of the order.
The tax would be deducted from the tolls, fees, rent, charges and royalty that a tenant pays on commercially rented space, machinery or establishment, the board said.
The order will not be applicable for residential tenants or finally transferred or sold space, establishment or machinery, a senior VAT official clarified.
"The NBR has imposed the VAT only on commercially rented space, machinery and establishment. Flat and apartment owners don't have to worry about the order," he said.
Officials said the order was long due as major cities in the country have been witnessing a boom in renting business of commercial space, structures and machinery in recent years.
"We see the sector as one of the major revenue generating areas from where the board could collect at least Tk 5.0 billion VAT every year," the official said.
The sector remained unexplored until last fiscal. The government brought it under the VAT net as part of its intensified move to find out more sources of internal revenue.
Service sector has been growing faster than the country's Gross Domestic Product (GDP) rate over the last half a decade, but revenue collection from its major areas is still depressing.
The board said the 15 per cent VAT will be imposed on total exchange value of commercial space if there is an agreement to pay rent under this system.
The owners of commercial space will deposit the VAT to the government exchequer within three days after collection, it said adding tax can be paid in installment or after a specific timeframe.
The board would also compel the owners of commercial space to pay the tax from his actual received amount if he fails to collect the 15 per cent tax from his tenant.
Tenants will have to deposit the tax through treasury chalan if he does not belong to any government, semi-government, autonomous body or non-government organisation or unregistered in the VAT department.
A member of the country's apex chamber slammed the order, saying it would increase cost of doing business in major cities.
"It's illegal. The government cannot impose VAT on these service sectors. Rented space or hired machinery doesn't add any value," said Bangladesh shop owners association chairman Amir Hossain Khan. Khan said the NBR should have consulted apex trade body, FBCCI, before issuing this sweeping order.