VAT System in Bangladesh – Short Notes

Key Points
● Definition: VAT is the tax on the value added by a taxpayer.

● Standard Rate: 15% (unless exempted).

● Not all must register — certain persons are exempt from VAT Act registration.

● Who pays VAT: Importers, suppliers, and providers of taxable services.

● Special rates may apply on certain services (reduced or fixed amount).

● Payment & Method: Specific time & method for VAT payment.

● Records: VAT payers must keep certain accounts and documents.

● Differences: VAT ≠ Turnover Tax (4%) ≠ Supplementary Duty (varies).

● Input Tax: VAT paid earlier by taxpayer on inputs.

● Supplementary Duty: Extra output tax on luxury/non-essential goods & services

(goods: 5%-500%, services: 10%-30%).

27.1 Introduction
● Full form: Value Added Tax (VAT) = tax on the value-added amount by a taxpayer.

● Purpose: Imposed when value addition is significant; can be applied at different stages
of production/distribution.

● Impact: Can shift burden through the chain until the final consumer.

● Example:

○ Manufacturer → Wholesaler → Retailer → Customer

○ Each adds value, VAT charged at each stage, but final burden on end
consumer.

● Type of tax: Considered expenditure tax (levied on spending, not income).

Legal Framework in Bangladesh
● Pre-1 July 2019: Regulated by VAT Act 1991, Finance Acts, VAT Rules 1991.

● New law: VAT & SD Act 2012 + VAT & SD Rules 2016, enforced from July 2019 (with
some parts earlier).

● Supporting orders: SRO No. 168-Ain/2019/25-Mushak & SRO No. 169-Ain/2019/25-

Mushak (June 2019).

Chargeability
● As per Section 15(3) of VAT & SD Act:

○ Rate: 15% on goods/services imported, produced, supplied, or rendered in

Bangladesh.

○ Exports: 0% VAT (except deemed exports where VAT applies).

Stage Input Processi Profi Output VAT on VAT on VAT

Value ng (C) t (D) Value Input Output Payabl
(B) (E=B+C+D) (F=Bx15%) (G=Ex15%) e (I=G–
F)

Importer 100 10 20 130 15.00 19.50 19.50*

Producer 130 35 15 180 19.50 27.00 7.50

Wholesaler 180 5 20 205 27.00 30.75 3.75

Retailer 205 5 15 225 30.75 33.75 3.00

Total VAT - - - - - - 33.75

Paid by
Consumer

*Importer’s VAT Payable includes VAT paid at import stage.

How it Works
 1. At each stage, seller collects VAT on output (selling price × 15%).

2. Seller deducts VAT already paid on inputs (credit system).

3. Only net VAT payable is sent to government.

4. Final consumer ends up paying total VAT (33.75) in the final price.

Quick Example:

● Producer buys goods worth 130 (including importer’s profit & processing) →
adds 35 processing + 15 profit = 180 output value.

● VAT on output = 27.00, minus input VAT 19.50 → net payable 7.50.

VAT Illustration – Key Explanations

● Computation:

○ VAT Payable at each stage = VAT on output – VAT on inputs already paid.

○ Importer: Process starts here; pays VAT on import and collects VAT from
producer.

○ Producer: Deducts VAT already paid at purchase stage from VAT charged on
sales.

○ Example: Producer adds value of Tk. 50 → VAT = 15% × 50 = Tk. 7.50.

Practical Notes
● Illustration shows basic VAT flow, but in reality Bangladesh has exceptions:

○ Reduced rate (lower than 15%)

○ Fixed VAT amount

○ VAT exemption

● Under reduced rate: Seller charges less VAT → cannot fully offset input VAT
against output VAT.
 ● Under exemption: No VAT on output stage → VAT paid on inputs becomes a
cost (no recovery).

● Under zero-rating (e.g., exports): VAT on inputs can be refunded.

Turnover Tax
● Levied on total receipts from supplying taxable goods/services.

● For manufacturers & suppliers (excluding compulsory VAT registrants) with annual
turnover ≤ Tk. 3 crore.

● Rate: 4% of annual turnover.

● No obligation to register for VAT if under turnover tax.

Supplementary Duty (SD)

● Imposed under the VAT & SD Act on:

○ Luxury goods

○ Non-essential items

○ Socially undesirable goods/services

● Collected along with VAT and deposited separately to the government.

● Not input tax → cannot claim input tax rebate.

● Exception: For exports, SD on inputs used in production can be refunded.

● Rates for FY 2024–25: 0%, 5%, 10%, 15%, 20%, 25%, 30%, 40%, 45%, 55%, 60%,
66%, 100%, 150%, 200%, 250%, 300%, 350%, 500%.

27.2 - Statutory Definitions (VAT & SD Act 2012)

1. Economic Activity
Any activity carried on regularly/continuously for making supply of goods, services, or
immovable property.
Includes:
 ● Any business, profession, vocation, livelihood, manufacturing, or undertaking (profit or
non-profit).

● Supply of goods, services, or property under lease, license, or similar arrangement.

● One-off commercial initiatives.

● Activities at the beginning/end of such operations.

Excludes:

● Services by employee to employer.

● Services by director to company unless for company’s business (then it counts as

economic activity).

● Non-commercial hobbies/recreational activities.

● Government activities without commercial motive.

2. Advance Tax
Tax payable in advance on taxable imports under Section 31(2).

3. Resident
An individual is a resident if they:

● Normally live in Bangladesh, OR

● Stay >182 days in a current calendar year, OR

● Stay >90 days in a calendar year and >365 days in previous 4 years.

Also includes:

● Companies incorporated or managed in Bangladesh.

● Trusts managed in Bangladesh or with resident trustee.

● Associations formed/managed in Bangladesh.

 ● Government entities.

● Property development joint ventures.

4. Input
● All raw materials, lab reagents/equipment, accessories, fuel, packing materials, services,
machines, and machine parts used for production.

Not considered as input:

● Land, labour, buildings, infrastructure, construction, repair, renovation.

● Furniture, office supplies, stationary, appliances (e.g., AC, refrigerator).

● Interior design, architectural services.

● Travel, entertainment, employee welfare expenses.

● Rentals for office/showrooms.

5. Input Tax
● VAT (excluding advance tax) paid by a registered person at import stage or on local
purchases of goods/services as input.

6. Output Tax
● VAT + SD payable by a registered person on:

○ Supply of taxable goods/services/immovable property.

○ Import of taxable services.

7. Withholding Entity
Includes:

● Government entities.
 ● Approved NGOs.

● Banks, insurance & financial institutions.

● Secondary-level or higher educational institutions.

● Limited companies.

● Any person/org with annual turnover > Tk. 10 crore.

8. Import
● Bringing goods into Bangladesh from abroad.

9. Imported Service
● Service supplied from outside Bangladesh.

10. Electronic Service

● Provided/delivered via telecom or internet networks, including:

○ Websites, hosting, remote maintenance.

○ Software & updates.

○ Digital content (images, text, music, films, games).

○ Access to databases, e-learning.

○ Political, cultural, sports, scientific, and entertainment broadcasts/events.

11. Tax – Includes VAT, turnover tax, supplementary duty, and any related interest, penalty, or
fine.

12. Tax Invoice – Document issued by supplier under Section 51.

13. Tax Assessment – Assessment of net payable tax by taxpayer (Chapter 5).

14. Tax Determination – Determination of tax by appropriate officer (Chapter 11).

15. Tax Fraction – Formula:

Tax Fraction=R100+R\text{Tax Fraction} = \frac{R}{100+R}Tax Fraction=100+RR

where R = VAT rate in Section 15(3).

16. Tax Period –

● For VAT & SD → 1 month (Christian calendar).

● For Turnover Tax → every 3 months (quarters ending 31 Mar, 30 Jun, 30 Sep,
31 Dec).

17. Taxable Import – Any import except exempted import.

18. Taxable Supply – Any non-exempt supply made through economic activity.

19. Tax Rate –

● VAT rate (Section 15(3))

● SD rate (Section 55(4))

● Turnover tax rate (Section 63(1))

20. Company – Entity incorporated under laws of Bangladesh or any other country.

21. Centrally Registered Entity – Entity centrally registered under Section 5.

22. Credit Note – Document issued by taxpayer for decreasing adjustment.

23. Turnover – Total money received/receivable for taxable goods/services supplied in a

period.

24. Debit Note – Document issued by taxpayer for increasing adjustment.

25. Enlistment Threshold – Limit of Tk. 50 lakh annual turnover (12 months) for economic
activity. Excludes:

● Value of exempted supply.

● Sale of capital asset.

● Sale of an organization of economic activities.

● Supply due to permanent closure.

26. Fixed Place – Any place (inside/outside Bangladesh) where economic activities occur, e.g.:
 ● Place of management.

● Branch, office, factory, workshop.

● Mine, gas well, quarry.

● Construction/installation project site.

27. Registration Threshold – Tk. 3 crore turnover in 12 months (same exclusions as

enlistment threshold).

28. Fair Market Price – Consideration agreed between unrelated buyer & seller in normal
circumstances. If unavailable, use price of similar supply or Board’s objective approximation.

29. Consideration – Money or fair market value paid/received for supply, including:

● Taxes, charges, service charges.

● Loan/finance payments for goods.

● Excludes: discounts given at supply time.

30. Supply of Goods – Transfer of right to goods via sale, exchange, lease, rent, installment,
hire purchase, etc. Includes goods under finance lease.

31. Deemed Export – Supply of goods/services in prescribed manner against foreign currency:

● For consumption outside Bangladesh.

● Within Bangladesh via international tender.

● Within Bangladesh under local letter of credit.

32. Representative – Includes:

● Guardian/manager for mentally/physically challenged individual.

● CEO of company, partner in partnership, trustee of trust.

● Chairperson/secretary/treasurer of association.

● CEO of govt entity or appointed officer.

● Officer of foreign govt.

● VAT agent for non-resident.

 ● VAT consultant or any prescribed representative.

33. Manufacturing –

● Transforming/reshaping substance into a different usable form.

● Includes printing, assembling, mixing, packaging, etc.

● Covers all processes for production, even if incomplete.

34. Increasing Adjustment – Includes:

● For withholding tax.

● For annual recalculation.

● If payment not via banking channels.

● For private use of goods.

● Upon cancellation/change of VAT registration.

● For change in VAT rate.

● For underpaid VAT in earlier periods.

● For payment of interest, penalty, fine, etc.

35. Person – Natural person or:

● Company, association of persons, govt entity, foreign govt, international organization,

joint venture, or other business organization.

36. Association of Persons – Partnership, trust, or similar association (excludes companies &
unincorporated joint ventures).

37. Business Identification Number (BIN) – Unique number on VAT registration/turnover tax
certificate.

38. Value –

● Value of import (Sec. 28)

● Value of supply (Sec. 32)

39. Value Added Tax (VAT) – Tax imposed under Sec. 15 on value added.
40. Export – Supply from Bangladesh to outside, in foreign currency, includes deemed export.

41. Adjustment Event –

● Cancellation or change of supply.

● Change in consideration.

● Return of supplied goods.

● Conversion into zero-rated or exempt supply.

● Any other prescribed event.

42. Supplementary Duty (SD) – Duty under Sec. 55.

43. Goods Subject to SD – Goods in Second Schedule.

44. Services Subject to SD – Services in Second Schedule.

45. Withholding Tax Deduction Certificate – Document under Sec. 53.

46. Government Entity –

● Govt or its ministries/divisions/departments.

● Semi-government or autonomous body.

● State-owned enterprise.

● Local authority/council or similar organization.

47. Supply – Includes:

● Supply of goods.

● Supply of immovable property.

● Supply of services.

● Combination of any of the above.

48. Time of Supply –

● Goods → When possession is given or removed.

● Services → When rendered, generated, transferred, or assigned.

 ● Immovable property → When delivered, created, transferred, or assigned.

49. Associate – Relationship where persons act in accordance with each other’s intentions
(includes partner, shareholder, trustee/beneficiary, joint venture partner, VAT agent/distributor).
Excludes employer-employee relationship.

50. Service – Any service but not goods, immovable property, or money.

51. Supply of Service – Anything that is not a supply of goods, money, or immovable property,
including:

● Grant/assignment/termination/conferment of a right.

● Making available a facility, opportunity, or advantage.

● Agreement to act, refrain from acting, or tolerate an act/situation.

● Issuance/conferment of license, permit, certificate, concession, or authorization.

52. Immovable Property – Title/right over immovable property, including land/buildings.

53. Supply of Immovable Property – Includes:

● Interest in, or right over, land.

● Personal right in land.

● License to occupy land.

● Right to occupy residential accommodation.

● Contractual right over/in relation to land.

54. Decreasing Adjustment – Reductions in VAT liability, such as:

● Adjustment for advance tax paid.

● Adjustment for withholding tax.

● Annual re-calculation.

● Where there’s a decrease in VAT rate.

● Adjustment for VAT overpaid in previous tax period.

● Other prescribed decreasing adjustments.

27.2.2 Statutory Definitions (VAT & SD Rule 2016)
1. Import Value – Value as per Section 27 of the Customs Act, 2023.

2. Contract Manufacturer – Manufacturer producing goods under contract (using inputs from
brand owner or own inputs) in exchange for payment.

3. Related Person – Two persons registered/enlisted under the Act with ≥50%
common ownership.

4. Backward Linkage Industry – Industrial undertaking supplying goods/services against

Inland Back-to-Back LC or Inland LC in foreign currency to a registered person obligated to
supply to an actual exporter.

5. Actual Exporter / Exporter – Person/establishment directly exporting goods/services to

Export Processing Area or abroad, complying with Export Policy & foreign exchange
regulations.

6. Supply under Barter Process – Supply transacted between two related persons through
barter.

27.3 VAT Registration & Turnover Tax Enlistment

When registration is required:
From the first day of a month, a person must register for VAT if:

1. Actual Turnover Condition – Turnover exceeds Tk. 3 crore in the preceding 12-
month period ending at the last day of the previous month.

2. Estimated Turnover Condition – Estimated turnover will exceed Tk. 3 crore in the
next 12-month period, starting from the first day of the previous month.

Example:

● Date: 15 July 2024.

● XYZ Ltd’s financial statements for YE 30 June 2024 show turnover of Tk.
30,500,000 (> Tk. 3 crore) → VAT registration required from 1 July 2024.

VAT Registration – Mandatory Cases

Example Recap:

● XYZ Ltd – Actual turnover > Tk. 3 crore → Must register.

● ABC Ltd – Projected turnover > Tk. 3 crore → Must register.

Mandatory Registration (Regardless of Turnover Threshold)
You must register for VAT if you:

1. Supply/manufacture/import goods or services subject to supplementary duty in

Bangladesh.

2. Supply goods/services under contract/work order or via tender.

3. Are involved in export/import business.

4. Establish branch/liaison/project office of a foreign organization.

5. Are appointed as a VAT agent.

6. Engage in specific economic activities listed by the NBR.

General Order (GO) No.17/Mushak/2019 (17 July 2029)

Certain manufacturers, service providers, and goods sellers must register even if below
turnover threshold:

SL Content Example

1 Manufacturer of goods Chocolate, noodles, biscuit, soap, detergent, plastic &

leather goods, wooden goods, ceramic/porcelain goods,
electric bulbs

2 Service provider Construction, consultancy, procurement, HR supply, ITES

3 Super shop/shopping mall Cement, ceramic/porcelain items, GP/CI Sheet, MS

& goods under Table-3 products, sanitaryware, aluminum fittings,
electric/electronic goods (AC, fridge, TV)
Unit or Central Registration
Definition:

● If a person keeps all accounts, tax deposit, and VAT records centrally (via
automated system) for supply of identical/similar goods/services from two or
more places → can take one central VAT registration.

● If accounts/tax records are maintained separately for each unit → separate

registration is required.

Restrictions:

● Special schemes for tobacco products → no central registration allowed.

NBR Guidelines (SRO No. 263-Ain/2019/79-Mushak, 18 Aug 2019):

Applicability: Central VAT registration allowed if:

a. Manufacturer produces & supplies identical/similar goods from multiple places.
b. Commercial importer imports goods → sells through owned & controlled sales
units.
c. Trader supplies goods through owned & controlled units.
d. Service provider offers identical/similar services via owned/controlled branches.
e. Manufacturer sells goods from multiple places after paying 15%
VAT/reduced/specific tax (not applicable if exemption granted for part of process).
f. Manufacturer sells goods from multiple places after paying VAT through different
owned sales centers/warehouses.

“Similar Goods” = Homogeneous products by nature/use (medicine, electronics, cosmetics,

toiletries, plastics, etc.).

Example – Central Registration

● ABC Company:

○ 2 factories, 1 central depot, 3 regional depots, 6 sales depots.

○ Factory 1 → Mobile phones, laptops.

○ Factory 2 → TVs, fridges, other electronics.

● Products from both factories → sent to central depot → stored in regional

depots → sold to distributors via sales depots.
 ● All accounts & records kept centrally in automated software → eligible for
central VAT registration.

Central Registration – Eligibility

● ABC Company keeps centralized automated records and supplies similar goods
from all factories, depots, and sales points → eligible for central VAT
registration.

Key Point:

● If goods/services move within centrally registered units, it is not treated as a supply

→ no input/output tax arises.

Procedure for VAT Registration

● Must apply within 15 days of becoming liable.
 ● Submit Mushak-2.1 form to Divisional Officer (can be online).

Documents Required:

1. Trade License.

2. Partnership deed / MOA / AOA / Ownership certificate.

3. TIN certificate (if any).

4. IRC/ERC certificate (if any).

5. Incorporation certificate.

6. List of all related selling centers (for central registration).

7. List of all input items with HS codes.

8. BIDA registration certificate (for manufacturers).

9. Passport & e-TIN of shareholders.

10. Bank solvency certificate.

After Submission of Mushak-2.1

● Divisional Officer issues Mushak-2.3 with Business Identification Number (BIN).

● Officer may visit company address to verify documents.

● False information → recommendation for VAT registration cancellation.

VAT Registration by Non-Resident

● Non-resident with no fixed place in Bangladesh but providing electronic services to
unregistered persons must register as non-resident.

● Must appoint a VAT Agent in Bangladesh.

● VAT Agent handles all responsibilities but non-resident is liable for taxes, fines,
penalties, interest.

● VAT registration by VAT Agent is in the principal’s name.

Uses of Business Identification Number (BIN)
BIN is required for:

1. All imports/exports (except baggage imports).

2. Registration of land/building in registered/enlisted person’s name.

3. Obtaining IRC & ERC.

4. Making supplies to withholding entities.

5. Participating in tenders.

6. Enlistment in organizations.

7. Bond license approval.

8. Bank loans for registered/enlisted persons.

9. Other cases as ordered by NBR Board.

Voluntary VAT Registration

● Any person making taxable supplies in the course of economic activities, not otherwise
required to register, may apply for voluntary registration with the Commissioner.

● Once registered voluntarily:

○ All VAT & SD Act provisions apply.

○ Must remain registered for at least 1 year before cancellation.

Enlistment for Turnover Tax

● Concept:

○ Alternative to VAT for small enterprises.

○ Applied on turnover (total money received/receivable from taxable

goods/services) for businesses within the turnover threshold (per Sec. 2(48) of
VAT & SD Act 2012).
 ○ Covers manufacturers, producers, traders, and service providers.

● Benefits: Easier, liberal tax treatment for small enterprises.

● Turnover Tax Rate: As per Sec. 63 of the Act (generally 4%).

Eligibility for Enlistment for Turnover Tax

● Thresholds:

○ Enlistment threshold: Tk. 50 lakh/year (above this, VAT exempt but turnover
tax payable).

○ Registration threshold: Tk. 3 crore/year (above this, VAT registration required).

● Revenue calculated for 12 months ending each quarter.

Example:

● ABC Ltd incorporated: 20 Feb 2023.

● Turnover by quarter:

Date Turnover (Tk.) Accumulated (Tk.)

31 Mar 2023 0 0

30 Jun 2023 1,000,000 1,000,000

30 Sep 2023 1,200,000 2,200,000

31 Dec 2023 1,500,000 3,700,000

31 Mar 2024 2,000,000 5,700,000

●
On 31 Mar 2024 → turnover exceeds Tk. 50 lakh → must apply for turnover tax
enlistment within 30 days (by 30 Apr 2024).

Procedure for Enlistment for Turnover Tax

● Eligibility: Annual turnover > Tk. 50 lakh but ≤ Tk. 3 crore.
 ● Application:

○ Submit Mushak-2.1 to Divisional Officer.

○ Officer issues Mushak-2.3 within 3 working days if satisfied.

● No renewal required once enlisted.

● No fee payable.

If turnover later exceeds Tk. 3 crore:

● Must apply for VAT registration (Mushak-2.1) within 30 days after the 12-month period
ends.

Suo moto registration/enlistment:

● If Commissioner finds someone should be registered/enlisted but hasn’t
applied → can register them directly.

Display of certificate:
● VAT registration / turnover tax enlistment certificate must be displayed visibly at the
place of business.

VAT Registration Cancellation

A registered person may apply for cancellation (Form Mushak-2.4) if:

1. Fails to start economic activity after registration.

2. Closes the business.

3. Business is declared exempted.

4. Annual turnover is below threshold for 2 consecutive years.

Procedure
● Divisional Officer will enquire:

○ If reasons are valid → suspend registration temporarily and inform

applicant.
 ○ If reasons are invalid/incomplete → suspend temporarily, give a chance
to be heard, and then decide.

● Within 15 days after final return verification, officer cancels registration if proper.

After cancellation, person must:

● Stop issuing VAT invoices, certificates, receipts, credit/debit notes immediately.

● Return VAT registration certificate & copies to officer.

● Pay all due VAT & submit final VAT return.

Cancellation of Turnover Tax Enlistment

An enlisted person can apply (Form Mushak-2.4) for cancellation if:

1. Stops all economic activity.

2. Turnover remains below threshold for 3 consecutive tax periods.

Procedure
● Commissioner conducts enquiry:

○ If reasons are valid → suspend enlistment temporarily, then cancel.

○ If reasons are invalid/incomplete → suspend temporarily, allow hearing,

then decide.

After temporary suspension, person must:

● Stop all Turnover Tax-related activities immediately.

● Return enlistment certificate & attested copies to Divisional Officer within 15 days.

● Pay any due tax & submit final Turnover Tax return.

Informing Changes in Registration

Registered/enlisted person must inform Divisional Officer within 15 days using Mushak-2.1
(online) or Mushak-2.4 (hard copy) for changes in:
 ● Business name/type

● Address/contact details

● Business location(s)

● Bank account details

● Nature of activities

● Ownership/partnership changes

● Any other prescribed information

Change in Place of Business

● Must inform Divisional Officer 15 days before change of location.

📌 The Rate of VAT (Section 15 of VAT & SD Act, 2012)

1. Standard Rate
● 15% (most goods/services)

2. Reduced / Other Rates

● Some goods/services have lower VAT to make them affordable:

○ 5%, 7.5%, 10%, or specific tax per unit.

○ Example: Petroleum, land development, medicines, flats, construction, etc.

👉 For example:

● Medicine: 2.4% VAT

● Flat re-registration: 2% VAT

● Building construction firm: 4.5% (for >1600 sqft)

3. Trade VAT (for traders)

 ● General traders: 5%

● Wholesale traders: 1.5%

📌 Provision for Wholesale Traders

● A wholesaler sells goods in bulk to other wholesalers or retailers.

● VAT for wholesalers = 1.5% of sales.

● Condition: Retail sales by wholesaler cannot exceed 20% of total sales.

✅ Example:

● A wholesaler sells goods worth Tk. 100,000 in a month.

● VAT = 1.5% × 100,000 = Tk. 1,500.

📌 Conditions for Wholesale VAT

● Applies to wholesale selling of:

○ Clothes (saree, lungi, three-piece, etc.)

○ Paper goods

● Must take certificate (Annexure-Kha) from Commissioner.

● No refund of Advance Tax (AT).

📌 VAT Records
Wholesalers must:

● Issue tax invoices in proper format.

● Maintain records (Mushak forms).

 ● Submit VAT return (Mushak-9.1) after each tax period.

📌 Persons Liable to Pay VAT

● Importer → When goods are imported, the importer pays VAT.

● Supplier → For any taxable supply in Bangladesh, the supplier pays VAT.

● Recipient → For imported services, the recipient (the buyer in Bangladesh) pays
VAT.

● In other cases → Either the supplier or the recipient can be liable depending on the
situation.

📌 Supplies Made in Bangladesh

Supplies are considered made in Bangladesh if:

1. Any supply by a resident.

2. A non-resident doing business in Bangladesh.

3. A non-resident supplying goods/services linked to Bangladesh, e.g.:

○ Related to land/property in Bangladesh.

○ Goods assembled or installed in Bangladesh.

○ Services performed physically in Bangladesh.

○ Broadcasting/telecasting services in Bangladesh.

○ Electronic services delivered to people in Bangladesh.

○ Telecom services used in Bangladesh (e.g., roaming).

📌 VAT Agent of Non-Residents

● Non-resident businesses providing digital/electronic services in Bangladesh must
appoint a VAT Agent.

● This agent is responsible for VAT compliance on behalf of the non-resident.

 ● The non-resident is still liable for any unpaid taxes, fines, or penalties.

👉 Example of services requiring a VAT Agent:

● Websites, hosting, remote software maintenance.

● Software updates.

● Online content (images, texts, information).

● Access to databases.

● Self-learning/education packages.

● Music, films, games.

● Online political/cultural/sporting/scientific broadcasts.

Zero-rated services (0% VAT)

These are services where VAT is charged at 0% (instead of 15%).
That means: business can claim input tax credit, but customers don’t pay VAT.

Examples of zero-rated services:

1. Service directly related to land outside Bangladesh.

(e.g., a Bangladeshi lawyer handling a land case in India).

2. Service physically given on goods situated outside Bangladesh.

(e.g., repairing a ship docked abroad).

3. Repair, maintenance, cleaning, renovation, or modification services on goods abroad

under special terms.

4. Service value included in customs value of imported goods.

(e.g., foreign packaging charges added into imported goods’ value).

5. Export of services outside Bangladesh.

(e.g., a Bangladeshi IT firm providing software support to a US client).

6. Services protecting intellectual property (IP) outside Bangladesh.

(patent, licensing, enforcement abroad).

7. Telecom services provided by Bangladeshi operators to non-residents.

(e.g., international roaming).

8. Services for goods under warranty abroad.

9. Insurance services for international transport of goods.

 10. Repair/maintenance services for ships or aircrafts in international transport.

11. Services to non-residents connected to operation/management of ships or aircrafts in

international transport.

Point to Note
● If any supply is both exempted & zero-rated → treat as zero-rated.

● 0% VAT does not apply to goods re-imported or intended for re-import.

✅ Easy example:

● A Bangladeshi company exports software to USA → VAT = 0% (zero-rated).

● A Bangladeshi mechanic repairs a ship in Singapore → VAT = 0%.

🔹 VAT Exemptions
Some goods and services are not charged VAT. These are called exempted supplies.
Examples:

● Goods/services listed in the 1st Schedule of VAT & SD Act 2012.

● Items subject to Turnover Tax instead of VAT.

● Supplies related to future right of purchase or sale.

● Certain goods at import stage, manufacturing stage, trading stage, and service
stage (as notified by NBR through SROs).

👉 Special Example from your page:

● Manufacturing stage

○ Cement sheet → 5%

○ Ferro-manganese / Ferro-silico-manganese alloy → Tk. 1000 per MT

 ○ Ferro-silico-alloy → Tk. 1200 per MT

● Trading stage

○ MS product → Tk. 200 per MT

● Service stage

○ Credit rating agency → 7.5%

🔹 Turnover Tax
If a small business does not come under full VAT, they may need to pay Turnover Tax instead.

● Rate = 4% of turnover (sales).

● Paid quarterly to the government.

● No input tax credit is allowed (unlike VAT where you can adjust input VAT against output
VAT).

👉 Example:
If a shop has sales of Tk. 10,00,000 in a year →
Turnover Tax = 4% × 10,00,000 = Tk. 40,000 (fixed, no adjustments).

✅ Easy Difference

● VAT = charged on value added at each stage, with input tax credit.

● Turnover Tax = charged directly on total sales, no input credit.

🔹 1. VAT on Imports
When goods are imported into Bangladesh, VAT is collected at the same time as customs
duty (under the Customs Act).
Even if import duty is not charged, VAT still applies.

🔹 2. How to Calculate Value of Taxable Imports

To find the value on which VAT will be charged, you add:
 1. Value of goods (as per Customs Act)

2. Customs Duty (CD)

3. Regulatory Duty (RD)

4. Supplementary Duty (SD)

5. Any other duties & taxes (except Advance Tax & Advance Income Tax)

👉 This total is called the Assessable Value (AV).

🔹 3. Example Calculation
Suppose,

● AV (Assessable Value) = Tk. 50,000

● Customs Duty (CD) = 25%

● Regulatory Duty (RD) = 3%

● Supplementary Duty (SD) = 20%

● VAT = 15%

● Advance Tax (AT) = 5%

Step-by-step:
1. CD = 25% of 50,000 = 12,500

2. RD = 3% of 50,000 = 1,500

3. SD = 20% of (50,000 + 12,500 + 1,500) = 20% of 64,000 = 12,800

4. VAT = 15% of (50,000 + 12,500 + 1,500 + 12,800) = 15% of 76,800 = 11,520

5. AT = 5% of 76,800 = 3,840

👉 Total Tax = 12,500 + 1,500 + 12,800 + 11,520 + 3,840 = Tk. 42,160

🔹 4. Re-imported Goods (after being exported)
If goods are re-imported, VAT is charged on:

● Enhanced value (due to repair/processing outside Bangladesh)

● Extra costs like insurance, freight, and landing charges

👉 Example: If you export machinery for repair and then bring it back, you pay VAT only on
repair cost + transport/insurance, not on the full value of the machine.

Imports for Exports

● If goods are brought into Bangladesh only for export purposes (not for local use),
then no VAT is payable.

● Example: A factory imports raw leather, makes finished bags, and exports them abroad.
Since the goods are for export, no VAT applies inside Bangladesh.

📌 Advance Tax (AT)

● AT = 5% of taxable imports (same way VAT is calculated).

● Every importer has to pay AT when goods enter Bangladesh.

● If AT is already paid, it can be adjusted against VAT liability in future tax returns.
(Exception: Wholesale traders pay only 1.5% on sales instead of full adjustment).

👉 Special rate for raw materials (used in manufacturing/production) → 3% AT.

📌 Documents needed to claim AT benefit:

1. VAT registration certificate (as manufacturer).

2. Input-Output Coefficient certificate submitted to Divisional office.

3. Updated Industrial IRC (Import Registration Certificate).

4. Last 12 VAT returns or system certificate.

 5. If not available online, a certificate from Divisional Officer.

📌 Refund of AT
● If the importer is the final consumer, they can claim a refund.

● Process:

○ Apply using Mushak-4.1 form within 120 days of paying AT.

○ Commissioner checks and issues refund within 15 days (via crossed cheque or
bank transfer).

📌 AT Exemption
● Certain imports listed in the 1st Schedule of VAT & SD Act 2012.

● Also some goods listed in special SROs (statutory regulatory orders).

● ⚠️But: If goods are VAT exempt (e.g., essentials), AT exemption does not apply unless
mentioned in SRO.

🔹 B: On General Supplies
1. Value of Taxable Supply
● According to Section 32 of VAT & SD Act, the value of taxable supply = Price of
goods/service minus the VAT portion (called VAT fraction).

👉 Formula for VAT Fraction = (Price × VAT rate) ÷ (100 + VAT rate)

✅ Example 1: Laptop
Price = Tk. 50,000
VAT = 15%
 ● VAT fraction = 50,000 × 15 / 115 = Tk. 6,522

● Value of taxable supply = 50,000 – 6,522 = Tk. 43,478

👉 Meaning: Out of Tk. 50,000 price, Tk. 43,478 is the product’s value, and Tk. 6,522 is VAT.

✅ Example 2: Mobile Phone

Price = Tk. 50,000
VAT = 15%
Supplementary Duty (SD) = 10%

● VAT fraction = 50,000 × 15 / 115 = Tk. 6,522

● Value of taxable supply = 50,000 – 6,522 = Tk. 43,478

● SD = 43,478 × 10 / 110 = Tk. 3,953

👉 Total Tax = VAT + SD = 6,522 + 3,953 = Tk. 10,475

So customer pays Tk. 50,000, which already includes VAT + SD.

2. Supplies Between Associated Entities

If one company sells goods to a related/associated company (e.g., parent-subsidiary, or sister
concern), the supply value should be at fair market price, reduced by VAT fraction.

Conditions:

● If goods are sold free or at a price lower than fair market price,

● Or the buyer cannot claim input tax credit,

👉 Then NBR says we must calculate based on fair market value.

3. Determining Fair Market Price

If buyer & seller are not related, the agreed price = fair market price.

But if they are related, then:

 ● If the price difference from earlier value is within ±10%, it’s acceptable.

● If difference is more than 10%, then we must calculate again using 5 prescribed
methods.

4. Five Methods to Find Fair Market Price

1. Comparative method – Compare with similar goods sold to unrelated parties.

2. Deductive method – Start from final selling price, deduct profit margin & expenses.

3. Computed method – Use cost + reasonable profit margin.

4. Holistic method – Consider overall factors like demand, market trends.

5. Objective approximation method – Use average prices of at least 7 similar

transactions.

✅ Example of Fair Market Price (Simple):

Company A sells a laptop to its sister company B at Tk. 35,000.
But market price is Tk. 50,000.

Since Tk. 35,000 is more than 10% lower, NBR won’t accept it.
So taxable supply will be based on fair market price = Tk. 50,000, not Tk. 35,000.

🔹 1. Fair Market Value for Non-Associates

(When buyer & seller are not related)

Flowchart Meaning:

● If there is a clear transaction value (the actual price paid), then that is considered the
Fair Market Value (FMV).

● If there is no transaction value (e.g., free supply, barter), then the committee will
determine FMV.

✅ Example:

● A company sells a laptop to a regular customer for Tk. 60,000.

→ Since there is a transaction value (Tk. 60,000), that is the FMV.
 ● If the company gives the laptop free to a stranger (not related), then there’s no
transaction value.
→ The VAT authority’s committee will decide the FMV (say Tk. 55,000).

🔹 2. Fair Market Value for Associates

(When buyer & seller are related parties like group companies, family-owned, or controlled
businesses)

Flowchart Meaning:

1. If transaction value = Nil (free supply) → Committee decides FMV.

2. If transaction value is lower than fair market value → Need to check further.

○ If the price is within 10% variation of earlier determined FMV → Accept

that price as FMV.

○ If the difference is more than 10% → Committee determines FMV.

✅ Examples:

● Case 1 (Nil value):

A company gives raw materials free to its sister company.
→ Since value is nil, committee decides FMV.

● Case 2 (Lower price but within 10%):

Last time, a mobile phone’s FMV was Tk. 20,000.
This time, the company sells to its related company at Tk. 19,200 (4% less).
→ Since the difference is less than 10%, Tk. 19,200 will be accepted as FMV.

● Case 3 (Lower price beyond 10%):

If the same phone is sold at Tk. 16,000 (20% less),
→ The committee will determine FMV again.

🔹 1. When Fair Market Value (FMV) rule does not apply

There are some exceptions where we don’t need to calculate FMV separately:

● Government fixed price → If Govt. fixes the price (like medicine, petroleum),
that’s automatically FMV.

● Tender price → If goods/services are supplied via tender, the tender price is
considered FMV.
👉 Example: Govt. fixes petrol at Tk. 120/litre. Even if the market is Tk. 130, VAT is calculated on
Tk. 120 (Govt. price).

🔹 2. Supply without consideration (Free samples, gifts)

● A registered business can give up to Tk. 20,000 worth of samples free per fiscal year
→ No VAT.

● If more than Tk. 20,000, the excess is taxable.

👉 Example:
Company ABC Ltd. gives free samples worth Tk. 50,000.

● Tk. 20,000 = exempt

● Tk. 30,000 = taxable supply (VAT applicable)

🔹 3. Situations where FMV is needed

FMV must be determined in these cases:

● Free samples beyond Tk. 20,000

● Import/supply of services by associates

● When goods sold to associates at below market price (so they cannot avoid VAT)

● Giving property (land/flat) to employees for free or at low price

● Goods liable to Supplementary Duty (SD) but not accounted properly

● Any supply without consideration or with inadequate consideration where SD applies

🔹 4. Input-Output Coefficient (Mushak-4.3)

● Every VAT registered manufacturer must file this before production.
 ● It shows how much input (raw material) is used to produce a certain amount of
output (finished goods).

👉 Example:

● To make 100 shirts, a factory uses 120 meters of fabric.

● Input-Output Coefficient = 120m : 100 shirts

This helps VAT office to check if input tax credit is genuine.

🔹 5. Time of VAT payment (Section 33, VAT & SD Act)

VAT becomes payable at the earliest of these events:

1. When the supply is made

2. When invoice is issued

3. When payment (full/partial) is received

4. When goods/services are taken for personal use

👉 Example:

● Laptop sold on 10 Jan

● Invoice issued on 15 Jan

● Customer pays on 20 Jan

➡️VAT payable from 10 Jan (earliest event).

🔹 Progressive or Periodic Supplies

Sometimes goods or services are supplied continuously (like electricity, gas, water, fuel). In
this case, VAT must be paid at the earliest time when:

● Separate invoices are issued, or

 ● Partial/full payment is received, or

● The amount becomes payable.

👉 If bills are issued monthly (like electricity), VAT must be paid within 90 days of invoice.

🔹 Sale of an Establishment as a Going Concern

● If a business is sold but will continue running normally, VAT is not imposed.

● Example: If a company sells one of its branches, that branch is considered a separate
economic unit.

Conditions:
● Seller and buyer must jointly apply in prescribed form (“Mushak-4.2”).

● Bank guarantee must be provided for all payable taxes.

● Buyer must receive documents like ownership info, financial statements, debt list, legal
cases, licenses, etc.

🔹 Supply of Prepaid Telecom Products

● If GP/Robi sells airtime worth Tk. 100 at Tk. 95 to an intermediary (PQR), VAT is already
paid at GP/Robi’s end.

● PQR reselling at Tk. 97 or Tk. 100 does not create additional VAT liability.

👉 VAT applies only once, not at every resale stage.

🔹 In-kind Benefits to Employees

● If a company gives employees goods or services instead of cash salary, VAT is
applicable.
 ● Example: Giving an employee a house at below market rent → VAT must be
paid based on fair market value.

🔹 Lay-by Sales
When goods are sold in installments:

● VAT is payable as each payment is made, not just at final payment.

● Each period’s tax is proportional to the payment received.

🔹 Cancelled Transactions
● If a sale is cancelled, VAT can be adjusted.

● If supplier keeps money from cancellation, VAT is payable on that amount.

🔹 Sale of Property in Satisfaction of Debt

● If a debtor gives property to creditor instead of cash to settle debt, VAT applies.

● The creditor must pay VAT before applying the money to the debt settlement.

● Both debtor and creditor are jointly liable.

🔹 Second-hand Goods for Resale

● VAT applies when buying/selling second-hand goods (except precious metals).

● But, VAT can be adjusted if the goods are bought for resale.

● If second-hand goods are for own use (not resale), VAT becomes a cost.
Formula for Net VAT
Net VAT=Output Tax (OT)−Input Tax (IT)+Increasing Adjustment (IA)−Decreasing
Adjustment (DA)\text{Net VAT} = \text{Output Tax (OT)} - \text{Input Tax (IT)} + \
text{Increasing Adjustment (IA)} - \text{Decreasing Adjustment (DA)}Net
VAT=Output Tax (OT)−Input Tax (IT)+Increasing Adjustment (IA)−Decreasing
Adjustment (DA)

Step 1: Output Tax (OT)

This is the VAT collected from customers when selling products.

● Sales = Tk. 7,000,000

● VAT rate fraction = 15/115

OT=7,000,000×15115=913,043.48OT = 7,000,000 \times \frac{15}{115} =

913,043.48OT=7,000,000×11515=913,043.48

Step 2: Input Tax (IT)

This is the VAT already paid on purchases, which can be adjusted (credit).

● Import VAT = 300,000

● Purchase from ABC Ltd. = 2,500,000 × 15/115 = 326,086.96

● Purchase from HT = 200,000 × 15/115 = 26,086.96

IT=300,000+326,086.96+26,086.96=652,173.92IT = 300,000 + 326,086.96 + 26,086.96 =

652,173.92IT=300,000+326,086.96+26,086.96=652,173.92

Step 3: Increasing Adjustment (IA)

This happens when VAT has been deducted at source (VDS).

● AB Legal invoice = 200,000 × 15/115 = 26,086.96

IA=26,086.96IA = 26,086.96IA=26,086.96
Step 4: Decreasing Adjustment (DA)
This includes Advance Tax and returned goods.

● Advance Tax (AT) = 60,000

● Goods Returned = 300,000 × 15/115 = 39,130.43

DA=60,000+39,130.43=99,130.43DA = 60,000 + 39,130.43 =

99,130.43DA=60,000+39,130.43=99,130.43

Step 5: Final Net VAT

Now plug values into the formula:

NetVAT=OT−IT+IA−DANet VAT = OT - IT + IA - DANetVAT=OT−IT+IA−DA

=913,043.48−652,173.92+26,086.96−99,130.43= 913,043.48 - 652,173.92 +
26,086.96 - 99,130.43=913,043.48−652,173.92+26,086.96−99,130.43
=187,826.09= 187,826.09=187,826.09

✅ Final Answer: Net VAT = Tk. 187,826.09

1. Assessment of Net Payable Tax

● Formula:
Net VAT = Output Tax – Input Tax (Credit) + Increasing Adjustment – Decreasing
Adjustment

● Includes a worked case study for NBPL (shoe manufacturing company):

○ Imports raw materials → VAT & Advance Tax

○ Purchases from local suppliers → input VAT

○ Sales with output VAT, adjustments for goods returned, VDS, etc.

○ Final Net VAT = Tk. 187,826.09

2. Input Tax Credit (ITC)

● Eligibility: Paid VAT on taxable supply can be claimed as credit if:
 ○ Invoice matches bill of entry.

○ Must be recorded in purchase register (Mushak-6.1 / 6.2.1).

○ Inputs declared in Mushak-4.3.

○ Claimed within same/next four tax periods.

○ Payment made through banking medium/MFS (if supply > Tk. 100,000).

● Not allowable if:

○ Output VAT not shown in return.

○ Claimed after 4 tax periods.

○ VAT paid on exempted goods/services.

○ Goods purchased under turnover tax.

○ Bank guarantee not settled.

○ Supplies below input price, entertainment, club membership, etc.

● Documents required:

○ Import → Bill of entry with BIN.

○ Supply → Tax invoice (Mushak-6.3).

○ Imported services → Treasury challan.

○ Utilities (electricity, water, telecom, etc.) → Invoice treated as tax

invoice if paid via banking channel.

📌 This section is all about how VAT credits can be claimed, restricted, and documented
properly for compliance.

🔹 What is Partial Input Tax Credit?

● Sometimes, a business uses both taxable and exempted supplies.

● In such cases, the full VAT paid on purchases (inputs) cannot be claimed as credit.

● Instead, a proportionate (partial) credit is allowed.

🔹 Formula for Partial Input Tax Credit
Partial ITC=I×TAPartial\ ITC = I \times \frac{T}{A}Partial ITC=I×AT

Where:

● I = Total Input Tax Credit during the tax period

● T = Value of taxable supplies (eligible for ITC)

● A = Total value of all supplies (taxable + exempted)

🔹 Example from the page

● Total Supply (A) = Taxable supply + Exempted supply
= 120,000 + 40,000 = 160,000

● Taxable supply (T) = 120,000

● Total Input Tax Credit (I) = 15,000

Now apply formula:

PartialITC=15,000×120,000160,000Partial ITC = 15,000 \times \frac{120,000}

{160,000}PartialITC=15,000×160,000120,000 =15,000×0.75=11,250= 15,000 \times 0.75 =
11,250=15,000×0.75=11,250

✅ So, business can claim only Tk. 11,250 as ITC (not the full Tk. 15,000).

🔹 Important Notes
● If T/A ≥ 0.90, it is rounded up to 1 → full ITC allowed.

● If T/A ≤ 0.10, it is rounded down to 0 → no ITC allowed.

● This is provisional → must adjust annually based on actual yearly totals.

👉 In short:
When a company deals in both taxable & exempted goods/services, it can’t take full input VAT.
Instead, it takes a proportionate credit using the formula.

🔹 What is Withholding VAT (VDS)?

When a supplier provides goods or services, sometimes the buyer (withholding entity) has to
deduct VAT at source before paying the supplier.

● Example: If a supplier charges Tk. 100,000 and VAT is 15%, the buyer may deduct 15%
VAT (Tk. 15,000) and pay Tk. 85,000 to the supplier.

● The deducted Tk. 15,000 is deposited directly to the government treasury on behalf of
the supplier.

This ensures the government gets VAT quickly and prevents tax evasion.

🔹 Important Rules
1. If supplier is not registered or doesn’t issue a valid tax invoice, then the buyer must
not take supply from them.
If they do, the buyer must bear the VAT themselves.

2. NBR (National Board of Revenue) has fixed specific VDS rates for certain services.
Even if normal VAT is 15%, some sectors have reduced rates (like 7.5%, 10%, 5%,
etc.).

🔹 Examples from the Table (shown in your image)

Service VDS Rate

AC Hotel 15%

Non-AC Hotel 7.5%

Restaurant 5%

Motor Vehicle Garage/Workshop 10%

Construction Firm 7.5%

Printing Press 15%

Land Development (Building up to 1600 [Link].) 2%

Land Development (more than 1600 [Link].) 4.5%

Freight Forwarders 15%

Furniture (factory supply) 15%

Furniture Sales Center (challan 7.5%) 7.5%

Courier Service 15%

Repair Services 10%

Audit/Accounting Firm 15%

Security Services 15%

IT Enabled Services 5%

Sponsorship Services 7.5%

Credit Rating Agency 15%

🔹 Technical Note
● VDS must be adjusted in the same tax period in which VAT was deducted.

● It cannot be adjusted after 3 months.

● For adjustments, Mushak-6.6 form is used.

✅ In simple words:
Withholding VAT (VDS) means instead of the supplier collecting VAT, the buyer deducts it
while making payment and deposits it to NBR. Rates vary by service type (5%, 7.5%, 10%,
15%).

📌 Goods/Services Exempted from VDS (Withholding VAT)

Some goods and services do not require VAT Deduction at Source (VDS). Examples:

● Goods supplied by manufacturers (if proper VAT invoice is given).

 ● Services already covered by other SROs (special govt. orders).

● Mandatory VDS items as per law (SRO No. 240-Ain/2021).

● Utilities: gas, water, WASA, electricity, telephone, mobile bill.

● Goods/services exempt under VAT & SD Act 2012.

● Zero-rated supplies (like exports).

● Furniture manufacturers or advertising agencies (if proper documents & challans

provided).

● If invoice issued from EFD/SDC machine with buyer’s BIN.

👉 In short: If the supplier is properly registered, gives valid VAT invoice, or the item is
exempt/zero-rated, then no VDS deduction is required.

📌 VDS on Import of Services (from outside Bangladesh)

1. Unregistered person

○ If you’re not VAT-registered and you buy/import a service from abroad,

○ The bank will collect 15% VAT when you send the money abroad.

○ This VAT is deposited in the govt. treasury.

2. Registered person

○ Bank will not collect VAT if you show proof that you already paid VAT using
treasury challan.

📌 VDS on Sub-Contract Projects

● If VAT is already deducted at the main service level,
→ No VAT will be deducted again at sub-contractor level.

● Example: A company hires an agency, and that agency hires another sub-agent.

○ VAT is deducted once by the main company.

 ○ No double VAT deduction on the sub-agent.

📌 Deposit of Withheld VAT

● If you deduct VAT, you must deposit it to govt. treasury within 7 days of next tax
period.

● If you fail, you must pay 2% simple interest every 6 months until deposited.

📌 Issuing Withholding VAT Certificate (Mushak-6.6)

● When you deduct VAT, you must give the supplier a certificate (proof of deduction).

● Issued in 3 copies:

1. VAT Circle Office (with original challan)

2. Supplier

3. Your own record (keep 5 years).

📌 Timeline for Issuing Certificate

● Must issue the certificate to the supplier within 3 working days after depositing VAT.

📌 Adjustment of Withholding VAT

● Supplier side:

○ Can adjust deducted VAT in his VAT return (Mushak-9.1) after receiving
certificate.

● Withholding entity side:

 ○ Must adjust deducted VAT in their return (Mushak-9.1).

✅ So in short:

● Not everything needs VDS (some exemptions apply).

● For imports, banks collect VAT unless you’re registered & already paid.

● For sub-contracts, VAT is not deducted twice.

● Deducted VAT must be deposited within 7 days.

● You must give supplier a certificate within 3 days.

● Both supplier & deductor adjust VAT in their returns.

🔹 Formula for Net Tax Amount

Net tax amount = Output Tax – Input Tax (Credit) + Increasing Adjustment – Decreasing
Adjustment

● Output Tax (A): VAT/SD payable on sales.

● Input Tax Credit (B): VAT already paid on purchases (can be adjusted).

● Increasing Adjustment (D): Additional VAT liability to add.

● Decreasing Adjustment (F): Reductions like Advance Tax or VDS deducted.

If after calculation, the result is negative, it means you paid more VAT (input, advance, VDS)
than what you owed.
👉 This extra amount can be carried forward for 6 tax periods or refunded.

🔹 Example from the image

Company XYZ’s monthly VAT calculation:

1. Output VAT & SD (A): Tk. 100,000

2. Input Tax Credit (B): Tk. 26,600

○ Imported goods Tk. 10,000

 ○ Local services Tk. 10,000

○ Electricity & Newsprint Tk. 5,000 @ 5%

3. VAT deducted at source (D): Tk. 100,000

4. Advance Tax (AT): Tk. 250,000

🔹 Step-by-step Calculation
1. Output Tax (A): 100,000

2. Less: Input Tax Credit (B): 26,600

→ Balance (C) = 73,400

3. Add: Increasing Adjustment (D): 100,000

→ E = 173,400

4. Less: Decreasing Adjustment (Advance Tax, etc.) (F): 250,000

👉 Net Payable Tax (G) = 173,400 – 250,000 = –76,600

🔹 Meaning
● The company doesn’t have to pay VAT this month.

● Instead, it has excess VAT credit of Tk. 76,600.

● This amount can be:

○ Carried forward to adjust with future VAT liability (up to 6 periods).

○ Refunded, but refund has conditions.

✅ In short:
The company paid more VAT (through advance tax & deductions) than required, so instead of
paying, it now has a credit balance (Tk. 76,600). This can reduce future VAT or be refunded.

📌 Carry Forward & Refund Mechanism of Negative VAT

If after adjustments, your net payable VAT is negative, it means you paid more input
tax/advance tax than output tax. In such cases:

1. First Step → Adjust the negative balance against VAT payable for the next 6
months.
(You can carry forward the balance instead of immediate refund).

2. After 6 months → Check remaining balance.

○ If less than Tk. 50,000 → No refund, balance will just continue to be

carried forward.

○ If more than Tk. 50,000 → You can apply for refund. Refund will be made
within 3 months after application.

📌 Conditions for Refund Without Carry Forward

You can apply directly for refund (without waiting 6 months) if the Commissioner is satisfied with
any of these cases:

(a) 50% or more of turnover comes from zero-rated supplies.

(b) 50% or more of expenditure on inputs is for imports or acquisitions used in making zero-
rated supplies.
(c) Your business activity usually results in excess input tax credits.
(d) If you paid Supplementary Duty (SD) during import of inputs for export,
refund/adjustment is allowed (SD doesn’t apply for local supply).

📌 Refund Application Process

● You must file all VAT returns up to date before refund is processed.

● Apply to Commissioner using Mushak-9.1 form.

● Commissioner will first adjust refund against any tax dues/penalties.

● If balance ≤ Tk. 50,000 → Can be treated as decreasing adjustment.

● If balance > Tk. 50,000 → Commissioner refunds within 3 months.

✅ In short:
 ● Negative VAT = carry forward up to 6 months.

● After 6 months: refund only if balance > Tk. 50,000.

● Direct refund possible if your business is mainly export/zero-rated supply.

🔹 Step 1: Filing VAT Returns

👉 No refund will be given unless the taxpayer (business) has filed all VAT returns up to date.

🔹 Step 2: Application Received

👉 Once you apply for a refund, the Commissioner will first check if you owe the government
any:

● Taxes,

● Penalties,

● Fines, or

● Interest.

If you do, the refund will be adjusted against those first.

🔹 Step 3: Check Remaining Balance

After adjustment, if there is still money left:

● ✅ If balance is ≤ Tk. 50,000 → You may be allowed to treat it as a

decreasing adjustment (carry forward).

● ❌ If balance is > Tk. 50,000 → The Commissioner will refund the money to you
within 3 months of your application.

🔹 Step 4: How to Apply

● You must apply in Form Mushak-9.1.
 ● After approval, the Commissioner will deposit the refund into your bank account or
issue a crossed cheque in your favor.

🔹 Refund/Adjustment of Taxes Paid in Excess

If you overpaid VAT compared to what was actually due:

● You can either get a refund, or

● Treat it as a decreasing adjustment in your next tax return.

📌 Simple Summary:

1. File all VAT returns.

2. Apply in Mushak-9.1.

3. Commissioner adjusts refund against dues.

4. If balance ≤ Tk. 50,000 → carried forward.

If balance > Tk. 50,000 → refund within 3 months.

🔹 What is Supplementary Duty (SD)?

● SD is a special type of tax imposed on:

○ Luxury goods

○ Non-essential or socially undesirable goods

○ Some services (to discourage consumption or raise revenue)

● It is justified in the public interest.

🔹 When is SD imposed?
1. Imports → On goods imported into Bangladesh.
 2. Local production → On goods manufactured in Bangladesh.

3. Services → On services rendered in Bangladesh.

👉 But SD applies only at one stage of the supply chain (not repeatedly at every step).

🔹 Exceptions (No SD applicable):

● Goods imported for export purposes (not home consumption).

● Goods/services that are zero-rated.

🔹 Who is liable to pay SD?

● Importer (for imports)

● Supplier (for locally manufactured goods)

● Service provider (for services in Bangladesh)

🔹 How to calculate SD?

1) If rate is percentage (%)
● Find the dutiable value of the goods/service.

● Multiply by the SD rate given in 2nd Schedule of VAT & SD Act.

2) If specific amount is mentioned

● Pay the fixed amount per unit (e.g., Tk. X per pack).

🔹 Value for SD at Import Stage

Value of SD = Assessable Value (AV) + Customs Duty (CD) + Regulatory Duty (RD)

👉 Then multiply by SD rate.

🔹 Value for SD at Local Supply Stage

Value of SD =
Total consideration of supply × (1 – (15/115)) × (1 – (10/110))
(where VAT = 15% and SD = 10%)

📌 This formula adjusts the taxable value by removing VAT and SD fractions.

🔹 Special Notes
● If goods/services are supplied without consideration (free) or under-priced, SD will be
imposed on the fair market value.

● If VAT is imposed on retail prices, then that retail price will also be used for SD
calculation.

✅ In short: SD works like an extra tax layer on luxury/unwanted items, added either at
import or local production stage, and calculated based on assessable value or supply
value.

🔹 Goods: Import Stage (when goods are imported into

Bangladesh)
SD is charged on luxury, harmful, or high-demand goods such as:

● Fresh/dried fruits, nuts, tomatoes, spices, chocolate

● Marble, granite, cement, petroleum products

● Detergent powder, mosquito coil, printed PVC sheet

● Toilet paper, tissue paper, woven fabrics, carpet

● Diamond, imitation jewelry

 ● Explosives, revolvers, pistols, and other firearms

● Liquor, motor vehicles

● Electronics like TV, refrigerator, VCP, VCR, VCD, DVD

👉 Example: If you import motor vehicles or liquor, you have to pay SD in addition to VAT &
customs duty.

🔹 Goods: Local Stage (produced/sold within Bangladesh)

These are mostly items harmful to health or luxury products:

● Cigarettes, Bidi, Zarda, Gul (tobacco products)

● Deodorants, antiperspirants, shampoo, paints

● Ceramic sinks, basins, bathroom fittings

● Filament lamps (except UV/infrared lamps)

● Carbonated beverages, energy drinks, fruit juices

● Mineral water (up to 3 liters)

👉 Example: A local company producing cigarettes must pay SD at the time of supply.

🔹 Services: Local Stage

Certain services within Bangladesh are also subject to SD:

● Satellite channel distributors

● Telephone services (SIM/RIM card-based mobile services)

● Renting out chartered aircraft or helicopters

● Services by BRTA (Bangladesh Road Transport Authority)

👉 Example: When you recharge your mobile SIM, part of the charge includes SD on telecom
services.
✅ Key Point:
SD is always charged on luxury, harmful, or socially undesirable goods/services. It is not
applicable on exports or zero-rated goods/services.

🔹 Step 1: Condition for Refund Application

● A taxpayer will not get any refund until all VAT returns up to the current tax period are
submitted.

🔹 Step 2: Commissioner’s Action

● When the application is received, the Commissioner first adjusts the refund against
any outstanding liabilities:

○ Tax due

○ Interest

○ Monetary penalties

○ Fines

🔹 Step 3: Balance Check

● If after adjustments, the remaining refundable amount is Tk. 50,000 or less →
➝ Commissioner may allow treating it as a decreasing adjustment (meaning it
will be adjusted in future VAT returns instead of cash refund).

● If the remaining refundable amount is more than Tk. 50,000 →

➝ Commissioner will refund the amount within 3 months of application.

🔹 Step 4: Application Form

● Refund application must be submitted in Form Mushak-9.1.
 ● If approved, the refund is given either by:

○ Direct deposit to the applicant’s bank account, or

○ Crossed cheque in favor of the applicant.

🔹 Step 5: Refund of Excess Payment

● If someone pays more VAT than payable, he can:

○ Apply for refund, OR

○ Adjust it as a decreasing adjustment in the next return.

✅ In short:

1. File all returns →

2. Apply in Mushak-9.1 →

3. Commissioner adjusts dues first →

4. If refund ≤ Tk. 50k → adjustment allowed,

If refund > Tk. 50k → refund within 3 months.

1. Decreasing Adjustment for SD

● If someone imports goods that are subject to Supplementary Duty (SD), they may
later get back (adjust) the SD they paid if:

○ The goods are exported again.

○ Or the goods are re-shipped abroad (by ship, plane, etc.).

● To get this benefit, they must apply to the Commissioner in Form Mushak-7.1 within 6
months of export.

● This is like saying: “I paid SD when importing, but since I didn’t consume it locally,
please reduce my tax.”
2. Collection of SD (How government collects SD)
a) At Import Stage
● SD on imported goods is collected at the same time and in the same way as customs
duty.

● Customs Act 2023 rules are followed.

b) At Local Stage
● When goods or services are supplied locally (inside Bangladesh), SD is collected at the
same time as VAT.

● So, VAT and SD are payable together at local sales.

👉 Important Point: Everyone who pays SD must also show it in their VAT return.

3. Books and Documents for VAT Purposes (Must

Maintain)
Every registered person (business) must keep proper records. These are called Mushak forms:

1. Mushak-6.1 → Books of Accounts for purchase

2. Mushak-6.2 → Books of Accounts for sale

3. Mushak-6.3 → Tax Invoice

4. Mushak-6.4 → Invoice for contractual manufacturing

5. Mushak-6.5 → Invoice of transfer of goods between branches

6. Mushak-6.6 → Certificate for VAT deduction at source

7. Mushak-6.7 → Credit Note

8. Mushak-6.8 → Debit Note

9. Mushak-6.9 → Turnover Tax Invoice

 10. Mushak-6.10 → Invoice data for purchase/sales over Tk. 200,000

📌 These must be kept for 5 years at the business place for auditing and tax checking.

✅ So, in short:

● Decreasing adjustment = claim back SD if goods are exported.

● Collection of SD = At import with customs, at local stage with VAT.

● Books & records = Mushak forms (6.1 to 6.10) must be maintained for 5 years.

🔹 Debit Note
👉 A Debit Note is sent by the buyer to the seller when:

● Buyer returns goods to seller (purchase return).

● Buyer was overcharged and wants to reduce the payable amount.

It increases seller’s liability (because seller now owes money back to buyer).

✅ Example:

● You ordered goods worth ৳10,000, but goods worth ৳2,000 were defective.

● You return those defective goods and send a Debit Note of ৳2,000 to the seller.

● It means: “I am debiting your account, reduce my payable amount.”

🔹 Credit Note
👉 A Credit Note is sent by the seller to the buyer when:

● Seller acknowledges returned goods.

● Seller gives a discount or correction of an extra charge.

It reduces buyer’s liability (because buyer has to pay less).

✅ Example:
 ● Continuing the same case: Seller receives your returned goods worth ৳2,000.

● Seller issues a Credit Note of ৳2,000 to you.

● It means: “I am crediting your account, you need to pay me less.”

🔑 Easy Formula:
● Debit Note → Buyer sends → To reduce his payable.

● Credit Note → Seller sends → To reduce buyer’s payable.

🔹 Debit Notes & Credit Notes

When debit or credit notes are issued, specific forms must be filled (Mushak-6.7 for credit note,
Mushak-6.8 for debit note).
They must include details like:

● Serial number, date & time of issue

● Supplier’s name, address, BIN

● Original invoice details

● Nature of adjustment

● Effect on VAT

● Recipient details (if VAT > BDT 5000)

👉 Important: If a credit note doesn’t have recipient info, no decreasing adjustment can be
claimed.

🔹 Books of Accounts (Documents to Maintain)

Registered persons must maintain:

1. Purchase Accounts Book (Mushak-6.1)

○ Records all purchases related to business.

2. Sales Accounts Book (Mushak-6.2)

 ○ Records all sales related to business.

🔹 Purchase-Sales Account (Mushak-6.2.1)

If someone buys goods and resells them without processing, they must record these in this
account.

🔹 Tax Invoice (Mushak-6.3)

Supplier must issue two copies of serially numbered tax invoice. It should include:

● Date, time, supplier’s name & BIN

● Buyer’s details (if value > Tk 25,000)

● Description & quantity of goods/services

● Value (excluding VAT)

● VAT rate & amount

● Summation of total supply & VAT

● Serially numbered invoice

🔹 Invoice for Contractual Manufacturing (Mushak-6.4)

● Owner transfers goods to contractor for manufacturing → Must issue Mushak-
6.4.

● Contractor, after finishing, returns goods → Must issue Mushak-6.4.

🔹 Invoice for Transfer of Goods (Mushak-6.5)

If a registered business transfers goods from one branch to another, they must issue this
invoice.
🔹 For Turnover Tax Purposes
Businesses must maintain:

1. Purchases & sales register (Mushak-6.1 & 6.2)

2. Turnover Tax Invoice (Mushak-6.9)

3. Treasury challan for turnover tax payments

4. Turnover Tax return (Mushak-9.2)

🔹 Submission Requirement (Mushak-6.10)

If purchases/sales exceed BDT 200,000, a statement must be submitted along with monthly
VAT return.

📌 Debit Notes & Credit Notes

● When debit/credit notes are issued, extra forms must be filled:

○ Mushak-6.7 (Credit Note)

○ Mushak-6.8 (Debit Note)

● Required information includes:

○ Serial number, date & time of issue

○ Supplier’s name, address, BIN

○ Related original invoice details

○ Nature of adjustment

○ VAT effect & payable changes

○ Buyer’s details if VAT impact > BDT 5,000

⚠️If credit note does not include buyer info, no decreasing adjustment can be claimed.

📘 Books of Accounts
 ● Purchase Accounts (Mushak-6.1): All purchases must be preserved.

● Sales Accounts (Mushak-6.2): All sales must be preserved.

● Purchase-Sales Account (Mushak-6.2.1): For resale without processing.

📑 Tax Invoice (Mushak-6.3)

● Two serially numbered copies must be issued.

● Must contain: Date/time, supplier & buyer details, description, quantity, value, VAT, total
amount, fiscal serial number.

📄 Other Required Invoices

● Contractual Manufacturing (Mushak-6.4) – for transfer of inputs & manufactured
goods.

● Transfer of Goods (Mushak-6.5) – between branches under central registration.

📕 Turnover Tax Books

1. Purchases & sales register (Mushak-6.1 & 6.2)

2. Turnover Tax Invoice (Mushak-6.9)

3. Treasury challan of turnover tax payment

4. Turnover Tax return (Mushak-9.2)

📊 VAT Return Submission

● Forms: Mushak-9.1 (VAT) & Mushak-9.2 (Turnover Tax)
 ● Deadline: Within 15 days of month-end (or next working day if holiday).

● Must include:

○ Sales aggregation, purchase aggregation

○ Payable taxes, rebates/deductions

○ Final accounts & balances

● Must be filed online.

⏰ Late Filing of Return

● Extension application: Mushak-9.3 (within 7 days).

● Commissioner must respond within 7 days; if not, considered approved.

● Penalty if not approved:

○ Tk. 5,000 fine

○ 1% monthly interest

✏️Amendments to Return
● Allowed under Section 66 with Mushak-9.4.

● No penalty for genuine errors (clerical/miscalculation).

● Cannot be amended for decreasing adjustment/input credit delay.

● Must be submitted within 4 years of original filing.

● If audit notice issued, cannot apply for amendment.

🔹 VAT Authorities under Section 78

The following officers are recognized as VAT authorities:

1. Chief Commissioner
 2. Commissioner

3. Commissioner (Appeal)

4. Commissioner (LTU – Large Taxpayer Unit)

5. Director General, Central Intelligence Cell (CIC)

6. Director General, VAT Audit, Intelligence & Investigation Directorate

7. Director General, Customs, Excise and VAT Training Academy

8. Director General, Duty Exemption and Drawback Office

9. Additional Commissioner / Additional Director General / Director (CIC)

10. Joint Commissioner / Joint Director (CIC) / Director

11. Deputy Commissioner / Deputy Director

12. Assistant Commissioner / Assistant Director

13. Revenue Officer

14. Assistant Revenue Officer

15. Any other officer appointed by the Board

🔹 Duties & Responsibilities of VAT Authority

The VAT Board and officers perform duties under the VAT & SD Act, 2012:

Board’s Responsibilities
● Carry out all functions, including policy-making.

● Exercise all duties and powers of VAT authority.

VAT Officials’ Functions

● Tax Collection & Record Keeping: Collect VAT/SD and maintain related accounts.

● Application of Law: Apply provisions of VAT & SD Act and rules.

 ● Administrative Functions: Perform duties given by the Board to ensure compliance.

● Other Functions: Any task assigned by the Board for the purpose of the Act.

🔹 Delegated Power
According to SRO No. 183-Ain/2019/40-Mushak (13 June 2019), the NBR delegated powers
to the Commissioner to carry out VAT-related functions.

🔹 Chain of Responsibility
● Higher officials (e.g., Chief Commissioner, Commissioners) → Create and
enforce policies.

● Mid-level officials (Joint, Deputy, Assistant Commissioners) → Supervise and

ensure compliance.

● Lower-level officials (Revenue Officers, Assistant Revenue Officers) → Carry

out daily VAT collection, monitoring, and reporting.

● System of Hierarchy: A senior officer may delegate responsibilities to a junior officer,

but still remains accountable.

📌 What It Means
If a business or registered person does not follow VAT rules, they may face penalties (fines).
These penalties depend on what type of mistake or irregularity was done.

⚠️Common Non-Compliance Issues & Penalties

Sl. Type of Non-Compliance (Irregularity) Penalty
No

(a) Not applying for registration/enlistment in Tk. 10,000

time

(b) Not displaying VAT/Turnover tax certificate Tk. 10,000

in a visible place
(c) Not informing Commissioner about change Tk. 10,000
in business activity

(d) Not applying for cancellation of Tk. 10,000

registration/enlistment in time

(e) Not following provision of section 9(5) Tk. 10,000

(f) Not filing VAT/Turnover tax return in time Tk. 5,000

(g) Not including output tax in the return Half or equal of the tax amount not
included

(h) Taking more input tax credit than allowed Half or equal of wrongly claimed input

(i) Wrong adjustment (increase/decrease Twice the wrong adjustment OR

wrongly) half/equal of decreased amount

(j) Not issuing invoice, credit note, debit note, Tk. 10,000
etc.

(k) Not keeping records properly Tk. 10,000

(l) Not providing fixed security Tk. 10,000

(m) Evasion or attempt to evade VAT/tax Half or equal of evaded amount

(n) Not filing input-output coefficient in time Tk. 10,000

(o) Claiming exemption wrongly under SRO Tk. 100,000

✅ Key Point
● Small mistakes like late filing → Tk. 5,000 fine.

● Serious cases like tax evasion → fine = half or equal of the evaded amount.

● Wrongly claiming exemption → Tk. 100,000.

🔹 Penalty for Unintentional VAT Avoidance

● If a business unintentionally avoids VAT, no penalty will be imposed.

● This protects honest taxpayers who make mistakes without intention.

🔹 Temporary Abstention from Giving Supply
● If a business wants to temporarily stop supplying taxable goods/services, they must:

1. Inform the Divisional Officer at least 48 hours before.

2. The officer will check stock and goods within 24 hours.

● If later the business wants to start again, they must inform the officer on the next working
day.

● If a business is temporarily closed, VAT authority will not penalize for not filing returns
during that period.

🔹 Monetary Limits of VAT Officers in Adjudication

Different VAT officers have different power limits depending on the value of goods/taxable
service:

Officer Power Limit

Revenue Officer Up to Tk. 5 lakh

Assistant Commissioner Up to Tk. 20 lakh

Deputy Commissioner Up to Tk. 30 lakh

Joint Commissioner Up to Tk. 50 lakh

Additional Commissioner Up to Tk. 1 crore

Commissioner More than Tk. 1 crore

👉 This means, for example, if a case involves Tk. 15 lakh, it will be handled by an Assistant
Commissioner, not a Revenue Officer.

✅ In short:

● No punishment if VAT avoidance was a mistake.

 ● Businesses can pause supply but must inform VAT authority.

● Higher-value cases are handled by higher-level VAT officers.

1. Audit & Investigation

● To prevent tax evasion, the Commissioner or Director-General can audit a taxpayer’s
activities.

● After investigation, the VAT officer submits a report in Form Mushak-13.3.

● If unpaid tax is found, the Commissioner decides the final tax liability (including interest)
and sends it for recovery.

🔹 Time limit: Audit should be finished within 120 days of written explanation submission.

2. Powers of VAT Officers

VAT officers can:

● Ask for necessary information/documents.

● Make copies of records.

● Seize or seal records/goods.

● Freeze bank accounts (if needed).

👉 If something is seized (documents, goods), it must be returned later after proper process.

3. Customs Officers’ Role

Customs Officers help with VAT on imports:

● Collect VAT and advance tax on imported goods.

● Collect supplementary duty (extra duty) on imports.

They act with the same powers as under Customs Act.

4. Supervised Supply & Surveillance
If a taxpayer is suspected of avoiding tax, VAT officers can:

● Keep the supply process under supervision and observation.

● Monitor at any place (factories, shops, warehouses, etc.) to determine the real tax
liability.

📌 In Short (Easy Summary):

● Audit = Checking if you paid correct VAT.

● VAT officers = Can demand info, freeze accounts, seize records if needed.

● Customs officers = Collect VAT and duties on imports.

● Surveillance = Officers can watch your supply chain if they suspect tax evasion.

1. Appeals & Revisions

Sometimes taxpayers may not agree with a VAT decision/order. In that case, they can appeal
to higher authorities.

(a) Appeal to Commissioner

● Must be filed within 90 days of receiving the decision/order.

● Time may be extended by another 60 days.

● At the time of appeal, the taxpayer must pay 10% of the disputed tax (penalty
excluded).

● Commissioner must resolve the appeal within 1 year.

(b) Appeal to Customs, Excise, and VAT Appellate Tribunal

● Must be filed within 90 days of receiving the decision/order.
 ● Tribunal President may allow extra 60 days if appeal is delayed.

● Again, 10% of disputed tax must be paid.

● If Tribunal cannot give decision within 2 years, the appeal is treated as granted.

(c) Appeal to High Court Division (Supreme Court)

● If still dissatisfied, taxpayer may appeal to High Court Division on a question of law.

● At filing, must also pay 10% of disputed tax (except penalty).

2. Miscellaneous Rules
Imposition of Interest
● If taxpayer fails to pay VAT on time, they must pay 1% interest per month (up to 24
months) on unpaid tax.

● If interest was paid wrongly, it will be refunded.

● Interest is in addition to penalties/fines.

● Special rule: 2% bi-annual penalty for not paying withholding VAT on time.

3. Maintenance of VAT Software

● As per GO No. 16/Mushak/2019, if a company’s turnover is more than Tk. 5 crore, it
must maintain records using VAT software approved by NBR.

● If any registration unit has turnover > Tk. 5 crore, that unit must use software.

● Entities may use their own software if it follows NBR specifications.

4. Submission of Audit Report

 ● Limited companies must submit previous year’s audited financial statements within
6 months of fiscal year end.

● Commissioner may allow up to 6 more months extension.

✅ In short:

● You can appeal to Commissioner → Tribunal → High Court.

● Pay 10% disputed tax before appeal.

● Delayed VAT payment attracts 1% monthly interest.

● Big companies (turnover > Tk. 5 crore) must use VAT software.

● Audit reports must be filed within 6 months.