FBCCI rejects latest VAT rule amendment

The apex chamber rejected government-proposed amendments to the existing VAT rules to resolve a standoff as it terms the draft a copycat of the ditched VAT and SD Act 2012.
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), in a recent letter to the National Board of Revenue (NBR), rather recommended formulation of the rules in line with the existing VAT law.
It also criticised NBR's delayed move to seek opinion of the FBCCI on the matter, after obtaining approval from the finance minister on the amended VAT rules 1991.
"As we said earlier, there is a lack of confidence between NBR and FBCCI," wrote FBCCI president Md Shafiul Islam Mohiuddin on a note of dissent.
The FBCCI sent the letter recently after scrutinising the draft VAT rules as per request of the revenue board.
The NBR had earlier sought FBCCI opinion about amendment of the draft VAT rules in a bid to incorporate the provision of digitisation of the taxing system.
"We want an impact study on the new VAT rules. The rules should be framed in a business-friendly manner," the FBCCI president, now in Vietnam, told the FE in Viber communication Tuesday.
VAT measures should be customised as per country's context; it is not universal like customs measures, he argued.
"Positive side of the new law can be adopted while negative aspects scrapped," he said about the much-debated updating of law on value-added tax.
Talking to the FE, NBR member (VAT policy) Md Rezaul Hassan acknowledged having received the FBCCI letter. "We are examining the FBCCI's proposal," he said, declining to make further statements in this connection.
In the current fiscal year (FY) budget, the government backtracked on implementation of the new VAT and SD Act 2012 from July 2017 and deferred it by two years following strong opposition from the businesses.
As the online VAT system has been developed in line with the new VAT act, the amendment of existing VAT rules 1991 is necessary to continue the digitised system in the VAT law.
"Method and process of the VAT-management-system automation is completely different in the VAT law 1991 and the VAT and SD Act 2012," the FBCCI president wrote.
It is not possible to digitise the existing VAT rules and law 1991 following the current automated VAT-management system that mainly supports the new VAT and SD Act 2012, he said in the letter.
"The online system has been developed according to the new law under the VAT online project (VoP), which is not consistent with the VAT law 1991," the letter of dissent reads.
The FBCCI proposed customising the existing VAT software under the VoP in line with the 1991 VAT law.
It is a difficult task to customise the software as studies will be needed to estimate its time, manpower, fund and negotiation with the vendors, the letter said.
After customisation of the software, the system of online submission of VAT returns and other digitised VAT system could be introduced.
The FBCCI recommended the formation of a high-powered committee with representation from the FBCCI, NBR, BASIS, Central Procurement Technical Unit (CPTU), the Ministry of Information and Communications Technology and other relevant entities.
It has proposed a Terms of Reference (ToR) for the committee that includes placing recommendations by conducting study of technical and financial involvement of customising the VAT software in line with the VAT law 1991, necessity of re-customization of the software after introducing the new VAT and SD Act-2012 from July 01, 2019, assessing and recommending increase in the capacity of the existing VAT software to automate invoices of the VAT-registered businesses and so.
The apex chamber leader expressed his deep concern over the existing automated VAT-registration process which is causing an exacerbation in harassment of businesspeople.
"We have received many complaints from the businesses on automated VAT-registration process," he said, terming it 'faulty'.
The registration system was automated in March 2017 on the basis of new VAT law of 2012, which remained unchanged in the existing VAT law 1991 after deferment of the law by two years, he said.
Businesses are facing different problems including absence of process of cancelation of VAT registration, lack of provision of obtaining VAT registration as cottage industry, recovery and amendment of the Identification Account, problems in registering as turnover VAT payers and obtaining central VAT registration, complexities on bank-account numbers and lack of provisions of verifying the number.
The FBCCI said under the VAT online system a business unit is required to furnish TIN (taxpayer identification number) for obtaining VAT-registration number but some of the organisations such as Red Crescent Society do not have to obtain TIN.
"A clear guidance or provision in the VAT online system is needed in this regard," the chamber suggested.
Ceiling of turnover tax is Tk 8.0 million in the existing law, but the VAT online system followed the turnover ceiling at Tk 15 million as per new VAT law 2012, causing difficulties in obtaining turnover-VAT registration.
In the new nine-digit VAT-registration number, there is no scope to mention 'business activity' of a VAT-registered business, causing difficulties in fixation of VAT rates at the time of deduction at source.
The chamber body identified irregularities and harassment in VAT- registration process as some VAT offices are issuing VAT registration under manual system despite having digitised BIN (business identification number)-issuance system.
"FBCCI thinks that the government should address the problems in the digital VAT-registration system before introduction of online VAT- return system," the letter said.
The chamber body alleged that the NBR sought FBCCI opinion without sending the draft of the amended VAT rules. The NBR vowed to finalise the amendments of the VAT at the first meeting with the FBCCI, which is not logical, it contended.
It expressed doubt over NBR's hurry in finalizing the amended VAT rules which took about four months to be drafted.
However, the FBCCI pledged to provide all-out cooperation in implementing its proposals.

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