Muhith: Businesses have to pay 15% VAT under new law
Samiul Bashar Anik

The government will keep the VAT rate at 15% under the new VAT law which will come into effect from July 1, 2016, said Finance Minister Abul Maal Abdul Muhith.

Addressing business leaders, he said: “This time the VAT rate will not be changed and it will only be imposed on value addition."

“Comply with the 15% VAT rate and improve your accounting system,” the minister told the businessmen at the 37th NBR-FBCCI consultative committee meeting in the city on Thursday.

The minister however said the government may consider the recommendation of the business leaders and impose a multiple VAT rate after the end of the current government's tenure.

Earlier in the same meeting, National Board of Revenue (NBR) Chairman Md Nojibur Rahman said Finance Minister AMA Muhith will sit with business leaders to hold a detailed discussion on the implementation of the new Value Added Tax and Supplementary Duty Act, 2012.

He said: “The finance minister will soon sit with businesses and discuss the details regarding the implementation of the new VAT law.”

The law that is set to come into effect from July 1, 2016, has already drawn widespread criticism from different quarters, mostly from leading business associations, as it will impose a uniform 15% VAT on all products and services from the existing multiple rates.

Regarding the implementation of the new VAT law, the leaders of Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) have recommended the government to impose the 15% VAT only on value addition instead of the total value of any product.

Bangladesh Insurance Association executive member Nasir Uddin Ahmed demanded the withdrawal of 15% VAT on commission provided to the agents for bringing insurance policies.

The parliament in 2012 passed the Value Added Tax and Supplementary Duty Act to automate the overall VAT administration to increase revenue collection.

Following the initiative, tax authorities in 2013 undertook the VAT Online Project to ensure a client-friendly and a service-oriented automated system.

The NBR is scheduled to start online VAT registration from July 1, 2016, and it is expected that all procedures including registration, payment, return filing, refund, and legal actions under the new VAT act will go online.

The new Value Added Tax and Supplementary Duty Act 2012 will have no provisions for package VAT or the truncated value-based VAT system. With the introduction of the law, all levels of business have to pay a unique and single VAT rate at 15%.

FBCCI said it would be tough for businesses to comply with various provisions of the new law.

“15% is very high and Bangladesh is not Malaysia, not even Thailand. The rate is 6% in Malaysia and 7.5% in Thailand. But why will Bangladeshi people pay 15% VAT?” FBCCI President Abdul Matlub Ahmad questioned soon after the decision was made.

The trade body requested the National Board of Revenue (NBR) to reduce the Value Added Tax rate to 7% from the existing 15%.

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