Cottage industries to continue enjoying VAT exemption: NBR

Businesses listed as cottage industry will continue to enjoy the VAT exemption even if they are located in Dhaka and Chittagong city corporation areas.
The cottage industries will not require obtaining the VAT registration number on a mandatory basis irrespective of their business turnover, said a clarification of the National Board of Revenue (NBR).
In the current budget, the NBR has made obtaining BIN mandatory for all manufacturing units, located in Dhaka and Chittagong city corporation areas, regardless of their turnover.     
The Value Added Tax (VAT) wing of the NBR issued the clarification Wednesday after it found confusions in field VAT offices over imposing VAT on the manufacturing units listed as cottage industry, which are enjoying the turnover tax benefit.
The clarification has been sent to the commissioners of VAT offices across the country.
The clarification came after the NBR noticed a number of field-level VAT offices are instructing the cottage industries in Dhaka (south) and Dhaka (north) and Chittagong city corporation areas to be registered with the VAT department.
There is no scope for forcing the cottage industry to obtain the VAT registration number and oblige them to pay VAT, said the clarification.
The board has scrutinised the matter as per existing VAT law and rules.
There is a necessity to clarify the issue as it is quite unclear as per VAT law, 1991, section 14 (1) and the circular related to cottage industry, it added.
Cottage industries have been enjoying VAT exemption since 2013 complying with some conditions.
A cottage industry, which is not a joint-stock company, will be exempted from paying VAT if its annual turnover does not exceed Tk 6.0 million and investment in plant, machinery and equipment does not surpass Tk 4 .0 million at any time in a year according to a Statutory Regulatory Order (SRO) issued in June 2013.
There is another SRO issued in June 2012 under which the NBR made VAT registration mandatory for 21 manufacturing industries and 61 services sectors, excluding cottage industry. The circular on the cottage industry is a negative list. The NBR kept the circular unchanged in the budget for FY 2016-17.  
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