Value Added Tax or VAT is such an indirect tax which is paid by the consumer through a registered person. Value Added Tax or VAT on a particular goods or service is determined on the basis of adding actual level of value of the said goods or service adjusting input tax payable against the supplied goods or service.

Supposing a goods was purchased for Taka 1000 and it was sold at Taka 1500, in that case, an amount of Taka 130.43 was included as VAT for the purchase of Taka 1000 (Calculation: 1000×15/115); likewise, a VAT amount of Taka 195.65 shall be inclusive of Taka 1500, if the goods is sold at that price.

(Calculation: 1500×15/115).
Actual addition will be Taka 500 if the goods is sold at Taka 1500 and as the seller had paid the price of the goods during purchase inclusive of the VAT, he will pay the VAT at the actual level of addition at the stage of sale, that is on Taka 500, taking back the VAT paid by him at the stage of purchase.

Payable VAT on Taka 1500-                                Taka 195.65
VAT included in Taka 1000-                                 Taka 130.43

Net payable VAT on Taka 500-                    Taka 65.22 (Calculation: 500×15/115)
Method of calculation by seller-             = (1500×15/115) – (1000×15/115)
=195.65-130.43
=65.22 Taka

Value Added Tax in view of Bangladesh are discussed to define a clear picture regarding the basic awareness and development of VAT in Bangladesh. The basic objective of this article is to provide a basic understanding of VAT and its implications which results in the betterment of the people and the country. This study is based on the secondary work previously done by different government and private organizations, over a span of time as well as website information and other internal reports. The study was basically carried out through secondary information as well as discussions with the government officials. Before discussing the development, implications, and importance of VAT, an overview of VAT will be helpful to create a platform of understanding of the terms and concepts of VAT.

A value-added tax or value-added tax (VAT) is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price, whereas, from the seller‘s point of view, it is a tax only on the “value-added” to a product, material or service, at the stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts and retains the rest for themselves to offset the taxes them

Had previously paid on the inputs. The “value-added” to a product by a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs. A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products. Personal end-consumers of products and services cannot recover VAT on purchases, but businesses are able to recover VAT (input tax) on the products and services that they buy in order to produce further goods or services that will be sold to yet another business in the supply chain or directly to a final consumer. In this way, the total tax levied at each stage in the economic chain of supply is a constant fraction of the value added by a business to its products, and most of the cost of collecting the tax is borne by business, rather than by the state. Value-added taxes were introduced in part because they create stronger incentives to collect than a sales tax does. Both types of consumption tax create an incentive by end consumers to avoid or evade the tax, but the sales tax offers the buyer a mechanism to avoid or evade the tax—persuade the seller that he (the buyer) is not really an end consumer, and therefore the seller is not legally required to collect it. The burden of determining whether the buyer’s motivation is to consume or re-sell is on the seller, but the seller has no direct economic incentive to collect it. The VAT approach gives sellers a direct

Financial stake in collecting the tax and eliminates the problematic decision by the seller about whether the buyer is or is not an end consumer.

An Overview of Value Added Tax
A value-added tax (VAT) is a fee assessed against businesses at each step of the production and distribution process, usually whenever a product is resold or value is added to it. A VAT is levied on the difference between the purchase cost of an asset and the price at which it can be sold. Producers and distributors typically pass the cost of the VAT on to the final consumer in the form of price increases. Tax is added to a product’s price each time it changes hands until delivery to the customer takes place when the final tax is paid. The value-added tax falls under the general category of a consumption tax, meaning taxes on what people buy rather than on their earnings, savings, or investments. VAT has also been

Referred to as a sort of national sales tax, though it functions very differently. Sales tax is imposed on the total retail price of the item sold, while VAT tax is imposed on the value added at each stage of production and distribution. And though more complicated than sales tax, value-added tax systems have more checks against tax fraud because the tax is assessed at more than one point in the distribution process.

It is a percentage-wise tax on the value added to a commodity or service as each constituent stage of its production and distribution is completed. VAT may be classified in three ways:

(I) on the basis of coverage of stages – throughout the production and distribution stages, or confined to limited stages – manufacturing plus wholesale, or wholesale plus retail;

(ii) On the basis of the method of calculation – tax credit method, subtraction

Method, and addition method; and

(iii) On the basis of tax treatment of final product capital goods such as machinery, equipment, and supplies – the consumption form, the income from, and the product variety. Thus the three broad types of VAT are the gross national product (GNP) type, income type, and consumption type. A consumption-type VAT is an indirect tax. An income type or a GNP type VAT might be considered as a direct tax but a commodity tax cannot be considered so. Consumption type VAT is also considered as an alternative form of ‘sales tax’.

The Vat Assessment Process

The process of assessing value-added tax occurs roughly as follows:

The manufacturer adds value to a product; the amount of value-added can be described as the difference between the cost of the materials used to make the product and the price charged to the customer (often a wholesaler).

The manufacturer pays value-added tax (a percentage of the value-added), which is then included in the purchase price charged to the customer (wholesaler).

The manufacturer gets a rebate from the government for VAT paid on the materials.

The customer (wholesaler) pays VAT on the value they add, which can be described as the difference between what they paid to the manufacturer and the price at which they sell it to their customer (retailer). This VAT amount is included in the price charged to the retailer.

The wholesaler gets a rebate for VAT from the government for the VAT paid to the manufacturer.

The retailer pays value-added tax on the value they add, which can be described as the price charged to customers less the wholesale cost and includes the VAT in the final sales price of the product. The retail store collects value-added tax from the person buying the product (retail price thus includes all VATs collected at each stage of this process) and gets a rebate for the VAT paid to the wholesaler.

Basic Characteristics of Value Added Tax

There are three types of value-added tax used around the world; each is different in the ways that taxes on investment (capital) expenditures are handled. The most common is the consumption method, which allows businesses to immediately deduct the full value of taxes paid on capital purchases. The second is the net income method, which allows the gradual deduction of VAT paid on capital purchases over a number of years, much like depreciation. The third type, gross national product method of value-added tax, provides no allowance for taxes paid on capital purchases. The name of this type of tax is derived from the fact that the tax base is approximately equal to private GNP. The consumption method is most favored among general populations because it most equally taxes income from labor and capital and promotes capital formation.

In theory, value-added tax systems with a uniform rate are neutral to all forms of productive input. However, countries across the world have had to modify the VAT system with multiple rates and exemptions to meet political, economic, and social needs. Most nations do not assess any tax on necessities such as food, medicine, and shelter. And because of the difficulty in computing value-added tax, professional services such as banking, accounting, and insurance are often exempt. The largest variation from uniform tax rates is the zero tax rates on exports. Since taxes will likely be assessed at a product’s destination, many do not impose a tax on the final selling price of exports. To compensate, the VAT is applied to imported products. Hence, countries working together seek a more balanced trade.

Basis for VATs

By the method of collection, VAT can be accounts-based or invoice-based. Under the invoice method of collection, each seller charges the VAT rate on his output and passes the buyer a special invoice that indicates the amount of tax charged. Under the accounts based method, the tax is calculated on the value-added, which is measured as a difference between revenues and allowable purchases. Most countries today use the invoice method, the only exception being Japan, which uses the accounts method. By the timing of collection, VAT (as well as accounting in general) can be either accrual or cash-based. Cash basis accounting is a very simple form of accounting. When a payment is received for the sale of goods or services, a deposit is made, and the revenue is recorded as of the date of the receipt of funds—no matter when the sale had been made. Cheques are written when funds are available to pay bills, and the expense is recorded as of the cheque date—regardless of when the expense had been incurred. While accrual is more complex than cash basis accounting, it provides much more information about the business. The accrual basis allows to match revenues to the expenses incurred in earning them, giving one more meaningful financial report.

নিম্নে উল্লেখিত উৎসে মূসক কর্তনের হার হলোঃ

১। ভ্রমন ব্যয় ( Traveling Expense ) সাধারণভাবে উৎসে মূসক কর্তন প্রযোজ্য নয় । এক্ষেত্রে হোটেল ও রেস্তোরার বিল থাকলে প্রযোজ্য হারে উৎসে মূসক কর্তন করতে হবে।

২। চিকিৎসা ব্যয় ( Medical Expense ) উৎসে মূসক প্রযোজ্য নয় ।

৩। অফিসের নানাবিধ ব্যয় ( Office Expense) চালানপত্র থাকলে চালানপত্রে উল্লেখিত হারে উৎসে মূসক কর্তন করিতে হবে। চালানপত্র না থাকলে যোগানদার হিসেবে বিবেচনা করে ৭.৫% হারে উৎসে মূসক কর্তন করিতে হবে।

৪। যাতায়াত খরচ ( Conveyance ) সাধারণভাবে উৎসে কর্তন প্রযোজ্য নয় । তবে রেন্ট–এ কার সার্ভিস গ্রহণ করলে ১৫% হারে ভ্যাট কর্তন করতে হবে।

৫। বিজ্ঞাপন ( Advertisement ) ১৫% হারে উৎসে মূসক কর্তন প্রযোজ্য ।

৬। যানবাহন ও জেনারেটর জ্বালানি তেল ( Fuel for Vehicles & Generator ) ক্রয়ের ক্ষেত্রে উৎসে মূসক কর্তন প্রযোজ্য নয় ।

৭। অফিস/গ্যারেজ/স্থান ও স্থাপনা ভাড়া ( Office/Garage/Land Rent ) ১৫% হারে উৎসে মূসক কর্তন প্রযোজ্য।

৮। জেনারেটর মেরামত ( Generator Maintenance ) এর ক্ষেত্রে সেবার কোড S031 এর অধীনে ১০% হারে ভ্যাট কর্তন করতে হবে।

৯। অগ্নি–বীমা ( Fire Insurance ) ১৫% হারে চালানপত্র গ্রহণ করতে হবে। এর ব্যত্যয় ঘটলেই কেবল ১৫% হারে উৎসে মূসক কর্তন করতে হবে।

১০। বীমার প্রিমিয়াম ( Insurance Premium ) ১৫% হারে চালানপত্র গ্রহণ করতে হবে। এর ব্যত্যয় ঘটলেই কেবল ১৫% হারে উৎসে মূসক কর্তন করতে হবে।

১১। কারখানা মেরামত ও রক্ষনাবেক্ষন ( Repair and Maintenance Factory ) নির্মাণ সংক্রান্ত কাজ হলে ৭.৫%, যন্ত্রপাতি ও যন্ত্রাংশ মেরামত থাকলে ১০% এবং সরঞ্জামাদি ক্রয় থাকলে প্রযোজ্য হারে উৎসে মূসক কর্তন করতে

হবে।

১২। অফিস রক্ষনাবেক্ষন ( Office Maintenance ) নির্মাণ সংক্রান্ত কাজ হলে ৭.৫%, এবং সরঞ্জামাদি ক্রয় থাকলে প্রযোজ্য হারে উৎসে মূসক কর্তন করতে হবে। ডেকোরেশন জাতীয় কাজ হলে ১৫% হারে উৎসে মূসক কর্তন করতে

হবে।

১৩। অডিট ফি ( Audit Fee ) এর ক্ষেত্রে ১৫% হারে উৎসে মুসক কর্তন প্রযোজ্য।

১৪। জরিপ ফি ( Surveillance Fee ) এর ক্ষেত্রে ১৫% হারে উৎসে মুসক কর্তন প্রযোজ্য।

১৫। বিশেষজ্ঞ/কনসালটেন্টের সন্মানি ( Technical & Professional Fee ) এর ক্ষেত্রে ১৫% হারে উৎসে মুসক কর্তন প্রযোজ্য।

১৬। স্টেশনারি সামগ্রী ( Stationery & Supply ) চালানপত্র থাকলে চালানপত্রে উল্লেখিত হারে উৎসে মূসক কর্তন করিতে হবে। চালানপত্র না থাকলে যোগানদার হিসেবে বিবেচনা করে ৭..৫% হারে উৎসে মূসক কর্তন করিতে হবে।

১৭। লোডিং–আনলোডিং ( Loading-Unloading ) এর কাজটি কে করেছেন, তার উপর নির্ভর করবে এর হার । পরিবহন শ্রমিক করলে ১০% , অন্যান্য ক্ষেত্রে ১৫% হারে কর্তন করতে হবে।

১৮। অস্থায়ী শ্রমিক ( Temporary Laborer ) সরাসরি নিজেরা শ্রমিক ভাড়া করলে উৎসে কর্তন প্রযোজ্য হবে না। তবে শ্রমিক সরবরাহের দায়িত্ব তৃতীয় পক্ষের উপর ন্যস্ত হলে মানবসম্পদ সরবরাহকারী সেবা বিবেচনায় ১৫ % হারে

ভ্যাট প্রযোজ্য ।

১৯। ডাকখরচ ( Postage ) বেসরকারি কুরিয়ার সার্ভিসের সেবা গ্রহণ করলে ১৫% হারে উৎসে মূসক প্রযোজ্য ।

২০। মুদ্রণ/ছাপখানার খরচ ( Printing) এর ক্ষেত্রে ১০% হারে উৎসে মূসক প্রযোজ্য ।

২১। বইপত্র/সাময়িকী ক্রয় ( Books & Periodicals ) এর ক্ষেত্রে উৎসে মূসক প্রযোজ্য নয় ।

২২। ইন্টারনেট সেবা ( Internet Service ) বৈধ মূসক –৬.৩ চালানপত্র থাকলে উৎসে মূসক কর্তন করতে হবে না। আর মূসক– ৬.৩ চালানপত্র না থাকলে ৫% হারে উৎসে মূসক কর্তন করতে হবে।

২৩। পরিসেবা ( Utilities ) এর ক্ষেত্রে উৎসে মূসক কর্তন প্রযোজ্য নয়।

২৪। ক্যাটারিং সেবা ( Catering Service ) এর ক্ষেত্রে ১৫% হারে উৎসে মূসক প্রযোজ্য ।

২৫। বিবিধ ব্যয় ( Miscellaneous Expense ) এর ক্ষেত্রে ১৫% হারে উৎসে মূসক প্রযোজ্য ।

২৬। আপ্যায়ন ( Entertainment ) চালানপত্র থাকলে চালানপত্রে উল্লেখিত হারে উৎসে মূসক কর্তন করিতে হবে। চালানপত্র না থাকলে যোগানদার হিসেবে বিবেচনা করে ৭.৫% হারে উৎসে মূসক কর্তন করিতে হবে।

২৭। পরিবহণ ভাড়া ( Freight Expenses ) স্থানীয় পরিবহণ ঠিকাদার কর্তৃক প্রদত্ত সেবার ক্ষেত্রে ১০% এবং ফ্রেইট ফরোয়ার্ডার কর্তৃক প্রদত্ত সেবার ক্ষেত্রে ১৫ % হারে উৎসে মূসক কর্তন প্রযোজ্য ।

২৮। ব্যবসার প্রচার সংক্রান্ত ব্যয় ( Business Promotion Expenses ) চালানপত্র থাকলে চালানপত্রে উল্লেখিত হারে উৎসে মূসক কর্তন করিতে হবে। চালানপত্র না থাকলে প্রচার/বিজ্ঞাপন হিসেবে বিবেচনা করে ১৫% হারে উৎসে

মূসক কর্তন করিতে হবে।

২৯। নিরাপত্তা সেবা ( Security Services ) এর ক্ষেত্রে ১০% হারে উৎসে মূসক প্রযোজ্য ।

৩০। রেজিষ্ট্রেশন ও নবায়ন সংক্রান্ত ফি ( Registration & Renewal Fee ) সংশ্লিষ্ট সরকারী দপ্তর বা স্থানীয় কর্তৃপক্ষ আদায়কৃত ফি এর উপর উৎসে ১৫% হারে ভ্যাট আদায় করবে।

৩১। ওয়েবসাইট সংক্রান্ত ( Website Hosting Charge ) তথ্য প্রযুক্তি নির্ভর সেবা হিসেবে এক্ষেত্রে ৫ % হারে উৎসে মূসক কর্তন প্রযোজ্য।

মূসক আইনের তৃতীয় তফসিলে উল্লেখিত কোনো সেবার ক্ষেত্রে সেবা সরবরাহকারী মূসক আইনের ধারা ১৫ এর উপধারা (৩) অনুযায়ী নির্ধারিত হ্রাসকৃত হারের পরিবর্তে ১৫% হারে কর চালানপত্র ইস্যু করতে পারেন । এরুপ ক্ষেত্রে উৎসে

মূল্য সংযোজন কর কর্তন ও আদায় বিধিমালা ,২০২১ এর বিধি ৩(২) এর ছকে বর্ণিত হারেই উৎসে মূসক কর্তন করতে হবে।

1. VAT registered all organization has to issue sales invoice Mushak-6.3 Challan, purchase ledger Mushak-6.1, sales ledger Mushak-6.2, and submission of VAT return VAT-9.1 formalities, otherwise VAT will be levied.

3. If the material price increases by more than 7.5%, no input tax credit will be given unless the new input-output coefficient is declared mandatory and any other VAT registered organization supply of goods against the input-output coefficient is declared mandatory.

4. All VAT-registered importers, producers, or service providers will have to comply with all the formalities of Mushak-6.3 Challan and VAT return submissions, including VAT accounting mentioned in Sections 51, 53, 54, 64, and 107 of the Value Added Tax Act, 2012, otherwise, VAT will be deducted.

5. In accordance with Sections 51, 52, 53, 54, 64, and 107 of the new VAT Act-2012 and Rule-40 of the VAT Rules-2016, VAT operations are conducted at all our cost centers/sales centers/warehouses/factories to comply with the formalities related to VAT. The required number of manpower is required to keep it.

In cases where VAT is not to be deducted at source:

1) Transport Contractor only in case of transportation of food grains Transport provider VAT Free Mushak-6.3 challan issue is mandatory, otherwise VAT deducted at source is applicable

*** a) Only food grain transport service providers will get a VAT exemption facility by SRO if they fulfill all the VAT related formalities, then they will get a VAT exemption facility. In this case only the transport service provider related to food grains can be informed to provide the service by fulfilling all the VAT related formalities, then the company will benefit.

**** Food Grains means-Bangladesh produces a variety of agricultural products such as Rice, Wheat, Corn, Legumes, fruits, vegetables, Chicken meat, fish and Seafood.

Therefore, to understand whether the supply of a product will be considered as a ‘supplier’ service, the following factors need to be considered:

a) If a producer or trader supplies goods with VAT-paid VAT-6.3 invoice at the rate of 15%, the said supply will not be considered as a “supplier” service and hence no need to deduct VAT at source.

However, if any, taxable goods are exempted at the production stage through notification and the goods are supplied directly by the manufacturing company along with “VAT-6.3 invoice”, the said supply activities will not be considered as “supplier” service.

b) If the supplier supplies such goods or services through Form VAT-6.3 (tax invoice) at which the VAT or specified tax is levied at a reduced rate, the entity deducting at the source shall deduct the total VAT or specified tax from the payable amount (money). [Note: SRO No. 240-Act / 2021/163-VAT Date-29th June, 2021 attached to VAT deduction at source attached and SRO No. 179-Act / 2022/192-VAT Date-01, June, 2022 ]

c) At the time of issuance or renewal of the license from the government, semi-government, autonomous body and local authority, VAT at the rate of 15 (fifteen) per cent should be deducted at the source on the total amount received from the beneficiary.VAT will have to be deducted at source on the connection fee when providing water, electricity, gas and telephone connections.

*** The tax ability of goods or services will be determined on the basis of the first part and the second part of the first schedule of the law. The exemption granted by notification (SRO) is considered as exempt only for taxable goods or services at different stages. In case of supply of such goods or services, VAT 6.3 will be deducted from the source of VAT if goods or services are supplied without invoice.

Special Note for following this issue:
1. In case of each purchase, a copy of VAT-6.3 invoice paid through VAT-6.3 invoice has to be paid within the month of purchase, as we have to take an input tax credit on the amount of VAT paid within the taxable period.

2. Provisions applicable at the time of payment will apply to supplies that have been contracted but not paid before the Value Added Tax and Supplementary Duty Act, 2012 comes into force.

If the VAT is not deducted at the source, it will have to be re-deposited with VAT on the purchase price and half-yearly interest at the rate of 1%. Both the supplier and the recipient of the goods or services will be equally responsible for the failure to deduct and deposit VAT at the source.

https://nbr.gov.bd/