Value Added Tax - VAT

Value Added Tax - VAT

VAT is imposed on goods and services at import stage, manufacturing, wholesale and retails levels;- A uniform VAT rate of 15 percent is applicable for both goods and services;

  • 15% VAT is applicable for all business or industrial units with an annual turnover of Taka 2 million and above;

  • Turnover tax at the rate of 4% is leviable where annual turnover is less than Taka 2 million;

  • VAT is applicable to all domestic products and services with some exemptions;

  • VAT is payable at the time of supply of goods and services;

  • Tax paid on inputs is creditable/adjustable against output tax;

  • Export is exempt;

  • Cottage industries (defined as a unit with an annual turnover of less than Taka 2 million and with a capital machinery valued up to Taka 3,00,000) are exempt from VAT;

  • Tax returns are to be submitted on monthly or quarterly or half yearly basis as notified by the Government.

  • Supplementary Duty (SD) is imposed at local and import stage under the VAT Act, 1991.

Truncated Base / Fixed Value Addition:

In some of the cases of goods and services producers and sellers face difficulties in availing VAT credit/adjustment facilities due to non availability of invoices from the sellers of input. In order to remove this operational difficulty fixed bases such as 10%, 25%, 30%, and 60% value addition is taken into account for calculation of VAT for a number of goods and services. In such circumstances net VAT rate for different rates of value addition comes to 1.5%, 2.25%, 4.5% and 9%.

VAT at the wholesale and retail stage:

In case of wholesalers and retailers, there is a special provision for a 1.5% percent VAT known as Trade VAT on the total sale, provided that the wholesaler/retailer do not avail the facility of input credit/adjustment. Such tax is also collected at the import stage from importers of finished goods as an advance trade VAT.

Tariff Value for imposition of VAT:

Under the VAT Law, the government is empowered to fix Tariff Value for some items for the collection of VAT. Example: tariff value for mild-steel products produced from imported/locally procured re-rollable scraps is TK 4000.00 per MT. Normal VAT input credit is also not available under this system.

Deduction of VAT at source:

As deduction at source is also practiced in case of VAT on certain services, Government, Semi-Government, Autonomous Bodies, NGOs, Banks, Insurance Companies and Limited Companies are authorized by the government to deduct applicable VAT on the services at source.

Excise Duty:

At present excise duty applies to only two items: bank deposits and domestic air ticket (Tk. 250 per journey).