Making service providers VAT-compliant
Saturday, 12 July 2008
The National Board of Revenue (NBR) has made installation of Electronic Cash Register (ECR) at the business centres under 10 categories of service-providers mandatory from the first day of 2009. The aim of the decision is to check evasion of Value Added Tax (VAT) by these business centres as well as to bring transparency in their sales documents. The businesses to be covered by these 10 categories of service-providers include hotels and restaurants, fast food shops, general stores, posh shopping malls, beauty parlours, community centres and so on.
According to the NBR sources, the move has been taken in view of the unsatisfactory record of VAT collection from the service-providers in question. In fiscal 2006-07, VAT collection from the hotels, according to reports, was Tk.520 million, while from the restaurants it was Tk. 270 million. Interestingly though, the amount collected from the private hospitals, clinics and diagnostic centres tapered off to a mere Tk. 170 million. However, the NBR has not been convinced that the figures on the amount of VAT collected from these service-providing bodies do reflect the reality on the ground.
The NBR move to get the ECR machines installed at the selling centres of the service-providers belonging to the above mentioned categories on a mandatory basis from the stipulated date, however, is facing resistance from the businesses concerned. To get over the problem, the NBR has decided to sit with the business bodies and the shop owners to dispel their confusion and thereby ease the mode of installing the ECR at the business centres in question.
The decision of the NBR, or of the government for that matter, to ensure collection of VAT from the categories of business, as noted in the foregoing through ECRs, was long overdue. In fact, the businesses concerned had started to charge the VAT from the customers from the day one that the government in the past had issued its order to that effect. But there was never any foolproof guarantee that the VATs so charged, as shown on the money receipts, did really reach the government treasury. So, the VAT compliance so far as the buyers of the service were concerned has been one hundred per cent. But a question always remained about the corresponding compliance from the sellers of the services concerned. It was not only the customer public who were wondering about the issue, the government, too, had the reason to be concerned about the matter, if only from the size of the VAT collection as reflected from the NBR statements at the year-end. So, under the usual circumstances, there is no justifiable reason as to why the service organisations should oppose such a modern system of making their transactions with the customers instantly transparent.
The strong arguments in favour of mandatory installation of the ECR machines at the selling points of the given category of businesses apart, one needs also to look more closely into the practical situations on the ground that might have been behind the confusion created over the issue among a section of the service-providers. For, there might be the questions of affordability and even availability of ECR machines in question. The point may be especially relevant to the case of the medium-scale operators in the businesses concerned, for they are against the mandatory nature of the government order to meet the deadline on the stipulated date. Under the circumstances, for the sake of familiarising as well as popularising the NBR move, a phased approach on meeting deadline may pay dividends in the long term in terms of ensuring full compliance from all the categories of the business concerned. For it is always cooperation, not coercion, that brings the results better.
According to the NBR sources, the move has been taken in view of the unsatisfactory record of VAT collection from the service-providers in question. In fiscal 2006-07, VAT collection from the hotels, according to reports, was Tk.520 million, while from the restaurants it was Tk. 270 million. Interestingly though, the amount collected from the private hospitals, clinics and diagnostic centres tapered off to a mere Tk. 170 million. However, the NBR has not been convinced that the figures on the amount of VAT collected from these service-providing bodies do reflect the reality on the ground.
The NBR move to get the ECR machines installed at the selling centres of the service-providers belonging to the above mentioned categories on a mandatory basis from the stipulated date, however, is facing resistance from the businesses concerned. To get over the problem, the NBR has decided to sit with the business bodies and the shop owners to dispel their confusion and thereby ease the mode of installing the ECR at the business centres in question.
The decision of the NBR, or of the government for that matter, to ensure collection of VAT from the categories of business, as noted in the foregoing through ECRs, was long overdue. In fact, the businesses concerned had started to charge the VAT from the customers from the day one that the government in the past had issued its order to that effect. But there was never any foolproof guarantee that the VATs so charged, as shown on the money receipts, did really reach the government treasury. So, the VAT compliance so far as the buyers of the service were concerned has been one hundred per cent. But a question always remained about the corresponding compliance from the sellers of the services concerned. It was not only the customer public who were wondering about the issue, the government, too, had the reason to be concerned about the matter, if only from the size of the VAT collection as reflected from the NBR statements at the year-end. So, under the usual circumstances, there is no justifiable reason as to why the service organisations should oppose such a modern system of making their transactions with the customers instantly transparent.
The strong arguments in favour of mandatory installation of the ECR machines at the selling points of the given category of businesses apart, one needs also to look more closely into the practical situations on the ground that might have been behind the confusion created over the issue among a section of the service-providers. For, there might be the questions of affordability and even availability of ECR machines in question. The point may be especially relevant to the case of the medium-scale operators in the businesses concerned, for they are against the mandatory nature of the government order to meet the deadline on the stipulated date. Under the circumstances, for the sake of familiarising as well as popularising the NBR move, a phased approach on meeting deadline may pay dividends in the long term in terms of ensuring full compliance from all the categories of the business concerned. For it is always cooperation, not coercion, that brings the results better.