Value Added Tax (VAT) is a consumption tax on goods and services. To replace the old Sales Tax system, the government implemented the VAT system in Bangladesh in 1991. Various development initiatives, social welfare initiatives, and ongoing government costs are all financed from the revenue generated by the VAT.
The National Board of Revenue (NBR) administers the VAT system in Bangladesh. The basic goal of VAT is to provide a tax system that is more effective, fair, and simple to manage for the people. This article provides an overview of the rule of VAT, including the VAT registration process, VAT rates, and VAT return BD. In the end, readers will better understand the role of VAT in the Bangladesh economy.
VAT Registration in Bangladesh
The business selling goods or services must register for Value Added Tax. According to the VAT registration process, you must submit an application to the NBR with certain documents.
VAT Registration Threshold
In Bangladesh, the annual barrier for VAT registration is BDT 3 million, or around $35,000. It indicates that companies with a BDT 3 million or less yearly revenue are exempt from the VAT registration requirement. Yet, if a company crosses this barrier, it must register for VAT within 15 days.
VAT Registration Process
One can get the application form from the NBR website or visit the nearest VAT office. You must complete the application form carefully and submitted with certain documents.
- A copy of the business registration certificate
- A copy of the TIN certificate
- A copy of the bank statement
- A copy of the trade license
- Two recent passport-sized photographs
- Other documents required by NBR
VAT Rates in Bangladesh
In Bangladesh, the typical VAT rate is 15%. Most products and services sold in Bangladesh are subject to this tariff. Nonetheless, there are some items and services that are free from VAT, as well as those that have lower VAT rates, which are –
Exempt Goods and Services
- The VAT excludes basic foods, including rice, wheat, and vegetables.
- The VAT does not apply to any kind of medicine.
- Books and stationery used in education are free from VAT.
- The use of buses and trains for public transit is free from the VAT.
- VAT does not apply to religious services provided by mosques, temples, or churches.
Reduced VAT Rates
- A lower VAT rate of 5% applies to healthcare services provided by hospitals, clinics, and medical professionals.
- A 5% lower VAT rate applies to educational services that schools, colleges, and universities offer.
- Seeds, fertilizer, and insecticides are just a few examples of agricultural goods subject to a 5% lower VAT rate.
- Land and construction sales are subject to a 4.5% lower VAT rate.
VAT on Imports and Exports
The regular VAT rate of 15% applies to imports as well. Nevertheless, some items and services could exclude from VAT or subject to lower VAT rates.
VAT is often not applied to goods and services exported from Bangladesh. Exporters can claim back VAT on inputs used in manufacturing and exporting products and services.
VAT Returns in Bangladesh
The VAT return is a document that details the company’s tax obligation for a specific period. The National Board of Revenue (NBR) must receive the VAT return regularly.
VAT Return Filing and Deadline
The company’s size determines the frequency of filing VAT returns in Bangladesh. Small businesses must submit quarterly VAT reports if their yearly sales are less than BDT 10 million (about USD 117,000). Medium and large companies must file monthly VAT returns with a BDT 10 million or more yearly revenue.
The deadline for the VAT return period in Bangladesh is the 15th day of the month following the end of the VAT return period. For instance, you must submit the VAT return by February 15th if the VAT return period is the month of January.
VAT Payment and Late Filing
The business must pay VAT to NBR due after filing the VAT return. The payment must be paid by the same date as the submission of the VAT return. There are several ways to pay, including at the VAT office, through bank transfer, or online.
Penalties and fines may apply if the VAT return still needs to be submitted. The fine for filing documents beyond the deadline is BDT 1,000 (about USD 12) each day, up to a maximum of BDT 25,000. (approximately USD 294). A late payment fee is 2% per month on the unpaid amount.
In conclusion, the rule of VAT law in Bangladesh is a crucial aspect of the nation’s tax system and considerably aids the government’s attempts to raise income. To avoid penalties and fines, companies and individuals must abide by VAT rules and regulations, and the NBR is crucial to enforcing these laws. The VAT system has undergone major modifications and improvements and continues to be an important tool for promoting Bangladesh’s economic progress.