VAT in easy language: 50

Question: The name of our organisation is Corporate Printers. As per description mentioned in trade license, the nature of our business is 'Printing Press: Printing, Packaging, Producer'. Against 'Tax Payer Type' on VAT registration certificate, the business nature of our organisation has been mentioned as 'Supplier (Manufacturing) and Service Renderer'. Against 'Activity Code' on VAT registration certificate 'C007.71: Packaging Material/products' has been mentioned. We obtained work order from a bank to prepare and supply diary and calendar. As per price mentioned in work order we have submitted price declaration for diary and calendar in the VAT Division Office.  VAT Division Office has approved our price declaration. We have purchased inputs for preparing diary and calendar. On completion of preparation, we have supplied diary and calendar to the bank issuing 'Mushak-11' Challan as per approved price. We maintain Account Current Register (Mushak-18) as per rule. We have issued 'Mushak-11' Challan deducting VAT payable against the supply from the balance of Account Current Register. The bank authorities want to deduct 15.0 per cent VAT from our bill. But so far our knowledge goes, under the above circumstance, VAT does not require to be deducted at source. We shall be obliged if you kindly give your opinion as per prevailing law. [Fatema Akter Jenin, Director, Corporate Printers, 54 Fakirapool, Motijheel, Dhaka-1000.]
Answer: In this case, VAT does not require to be deducted at source. There is a list of services in paragraph 2 of the General Order No. 25/Mushak/2013, Dated: 06 June, 2013 issued by the National Board of Revenue regarding VAT deduction at source (VDS). In the cases of those services, VAT deduction at source is compulsory (with few exceptions). The renderers of those services have been given two options to facilitate VAT deduction at source on those services. First option is, the renderer of service shall pay VAT in his place as per normal course and while making payment against the service the service receiver shall deduct VAT from the bill. The VDS (VAT Deduction at Source) withholding authority shall issue certification of such deduction in 'Mushak-12kha' form. The renderer of such service shall make positive adjustment entering the amount in serial 12 of his VAT return on the basis of VDS deduction certificate. This means that VAT has been paid once and deducted once from the same supply and has been made positive adjustment once. Thus, paying twice and adjusting once means that VAT has been paid once against the supply. The second option is that the renderer of any of those listed service shall issue VAT Challan against provision of service but shall not pay VAT in his place as per normal course. The VAT withholding authority shall deduct VAT at source while making payment. The withholding authority shall issue certification of VDS deduction in 'Mushak-12kha' form. But the renderer of the service shall not be allowed to take positive adjustment in his VAT return against VDS deduction certificate. This means that, against that service VAT has only been deducted at source but has not been paid during service provision. In other words, VAT has been paid only once against the provision of the service. This is the general procedure for deducting VAT at source on the services listed in paragraph 2 of the General Order mentioned above.
Printing Press is a service that falls within that list. So, in the case of the services rendered by Printing Press the above procedure applies. It appears that the bank has perceived your supply as service given by Printing Press as mentioned in above procedure and therefore wanted to deduct 15.0 per cent VAT at source. But in real sense, your supply is not a supply of service rendered by a Printing Press rather your supply is the supply of goods. The goods are diary and calendar. You have prepared diary and calendar and supplied diary and calendar to the bank. The provisions of VAT on the production and supply of diary, calendar, view card, invitation card, greetings card, gift card etc. and the provisions of VAT on the production and supply of soap, shampoo, vehicle, biscuit, cement, tin, milk powder, generator, UPS and other VAT-able goods are the same. Since the items such as diary, calendar, view card, invitation card, greetings card, gift card, etc. are prepared in Printing Press, so the supply of these items are often mistaken by VAT withholding authorities as the provision of services by Printing Press.
As per clause (a) of paragraph (2) of the General Order mentioned above, if any producer or trader gives any supply with proper VAT Challan, such supply shall not be considered as service rendered by 'Procurement Provider' and as such VDS does not require to be deducted at source from such supply. In that General Order, those cases remain mentioned where VDS does not require to be deducted at source. When any producer produces goods and supplies those goods directly to any VDS withholding authority issuing proper VAT Challan, then VDS does not require to be deducted from such supply. Because in such case, the supplier is not a Procurement Provider. He is a Procurement Provider who supplies goods to any VDS withholding authority either procuring the goods from any local producer or trader or importing those goods from abroad. As per your VAT registration certificate and trade license, your organisation is producer and service renderer. An organisation can be a producer, service renderer, importer, exporter and trader at the same time. On the VAT registration certificate, only one Activity Code can be mentioned because of shortage of space. But an organisation does not produce only one item or renders only one service. All items to be produced by an organisation and all services to be rendered are to be mentioned against serial no. 15 - 'Item(s) to be produced and/or traded/Service(s) to be rendered' of application for VAT registration (Mushak-6). Of those goods and services, only one principal item is mentioned on the VAT registration certificate against Activity Code. The case may be that the diary and calendar have been printed in Printing Press but since price declaration has been given and approved by VAT Divisional Officer as goods, VAT Challan has been issued during supply, the supply has been made deducting payable VAT from the balance of Account Current Register, so the supply constitutes the supply of goods, not the supply of service as per the relevant provisions of the VAT law. Since it is the supply of goods, so VAT does not require to be deducted at source from such supply. A relevant thing needs to be mentioned here that while making price declaration against the goods to be supplied against tender or work order, the price mentioned in the tender or work order is to be cited in price declaration. Generally, the tender or work order price is accepted and approved by the VAT Divisional Officer. In such case, the goods are to be supplied issuing VAT Challan in tender or work order price i.e. approved price. As per your description, your organisation has complied with all these formalities. So, your supply is neither a supply of service by Printing Press nor provision of service by 'Procurement Provider. Rather your supply is the supply of goods and the status of your organisation is that of a supplier (manufacturing). So, VDS does not require to be deducted at source from the supply.        
Dr. Md. Abdur Rouf is Director of the Central Intelligence Cell and Deputy Project Director of the VAT and Supplementary Duty Act, 2012 Implementation                                Project, National Board                            of Revenue (NBR). roufcus@yahoo.com