Indirect Tax Certificate Level (13th Batch)

Class Session –Dec 22 to Feb 23

Section _ C
Class # 01 & 02
Date: 12th December 2022

Time : 7.00 pm to 10.30 pm

 Effective from
1st Examination
of the year 2023

Syllabus of Indirect Tax_CL

 Number of class
Theory

Class Allocation
Previous year Question
Assessment

Total Class 12

Class 01~ 08 Theory Part

Class 09 P/Y Question Disc.

Class 10 ~ 12 VAT & CD Assessment

 Today’s Class contents :

Concept & Introduction;

Definition;

VAT Authority;
Concept of VAT
 What is VAT ?
A value-added tax (VAT) is a consumption tax placed on a product whenever value is
added at each stage of the supply chain, from production to the point of sale.

Value-added taxation is based on taxpayers' consumption rather than their income.

VAT is a tax on final consumption which is collected a every stage of production and
distribution rather than at the retail stage alone

This is one type of Indirect tax ;

 History of VAT

• Vat is the youngest member of the sales tax family;

• Year of 1919 German business man Mr. Dr. Wilhelm Von

Siemens introduce the VAT concept;

• 1921 USA Professor Thomas S. Admes introduce Vat

rebate procedures;

• In 1954, France is the first introduction country of VAT

system ;
VAT In Bangladesh
• After independence, there was no tax in Bangladesh under the head of
VAT;
• In April 1979, the Taxation Enquiry commission (TEC) officially took up
the issue of introducing VAT in Bangladesh as an alternate to sales tax.
• Until 1982, sales tax was being collected under the Sales Tax Act 1951,
which was replaced by the Sales Tax Ordinance 1982 with effect from
1st July 1982.

• Final version of the VAT Act was promulgated 31 May 1991 as a

Presidential Ordinance with eight sections. It was made effective from 1st
July 1991.

• 10th December 2012 Bangladesh Parliament has passed the new vat act
“The Value Added Tax and Supplementary Duty Act, 2012”, and
implemented from 1st July 2019 through Finance Bill 2019.
VAT vs Sales Tax

VAT Sales Tax

VAT is Multi point levy system Sales Tax generally single point levy
system

In VAT full set-off of the tax paid at the In Sales Tax no tax is being levied on the
earlier stage is granted value addition on subsequent sales.

VAT eliminates tax cascading Sales Tax does not eliminate cascading
effect of tax.
New Vat Act
• VAT & Supplementary Duty ACT 2012;

• At first Govt. had plant to introduce from 1st July 2016; but can’t;

• Then new affected date re-fixed from 1st July 2017; again can’t, now this new
act deferred for another two years;

• Major change made in new Act 2012 then Act 1991;

• This will be effective from 1st July 2019 through Finance Bill 2019

** Later on provide you what is the major difference between old (1991) Vs new (2012) act.
What is Tax as per new VAT Act

➢ Value added tax;

➢ Turnover tax;
➢ Supplementary duty;
➢ Interest & Fine of arrear collection;

AT
Value addition in different level
1200

1000

800
Price

600

400

200

0
Import Price Importer Sales Price Producer Sales Price Wholesaler Sales Price Retailer Sales Price

Supply
VAT ?
• This is one type of Indirect tax ;
• This impact and incidence of taxes fall on different persons;
• An important source of revenue financing of the Bangladesh
Government;
• It comprises more than 37% of government tax revenue in a
year;
• Government heavily relies on VAT.
Direct tax vs Indirect Tax
Impact and incidence of a tax are often a
major basis of classification a tax system.
On the basis of ‘impact and incidence of
taxes’, a taxation system may be called
direct or indirect taxation system.

When both the impact and incidence of tax

fall on same person or entity, it is called
direct tax. Income tax, wealth tax, Gift
tax, inheritance tax etc.

When the impact and incidence of tax fall

on different persons or entities, it is called
indirect tax. Here, the incidence can be
shifted from the payer to the ultimate
consumer of the goods or services. VAT,
Custom duty are the example of indirect
taxes.
Tax Classification in Bangladesh
TAX
35%
Direct Tax 38% Indirect Tax

Income Tax VAT

Corporate Tax Import Duty

Excise Duty
Wealth Tax
Turnover Tax
Travel Tax 15%
SD
Important Feature
• VAT is the tax on the value added by a tax payer;
• This is one kind of indirect tax;
• Unless exempted, VAT is payable and the rate is 15%;
• Some persons are not required to be registered under VAT Act;
• VAT will be paid by the importer, suppliers and provider of taxable
services;
• On certain services estimated value addition is instructed for determining
VAT;
• This is one kind of self-assessment systems;
• Some books of accounts and documents are required to be maintained by
the taxpayer;
Advantage of VAT

• Less chance to tax evasion;

• Simple administration compare to other tax;
• Transparent and minimum burden;
• Self-assessment procedure;
• This is based on value added not on total price;
• Mass participation systems.
Disadvantages of VAT

• Costly to implement;
• Complex to understand;
• Need to calculation in every stage;
• Increase inflation.
Reasons/Economic impact in BD
• To generate more internal resources;
• To introduce VAT as the main vehicle for resource
mobilization;
• Bringing transparency on the taxation system;
• Activating the overall economy by mobilizing more internal
resources ;
• Bringing the consistency in the Tax to GDP ratio;
• Facilitate broadening to tax base;
Credit/Rebate
Mechanism
VAT Credit/Rebate Mechanism
Import Level: Industry Level:
USA
Exporting Value for Vat : Tk 100 Value for Vat: Tk 160
Country Rate of Vat @ 15% Rate of VAT @ 15%
Total Vat ; Tk 15 Total VAT : Tk 24
Vat paid value: Tk 115 VAT Rebate : 15
Net Vat : (24-15)=9
Vat Paid value : Tk 184
Total Vat 15+9+3+6=33

Wholesale /Retail Level : Distribution Level:

Consumer Level : Value for VAT : Tk 220 Value for VAT: Tk 180
Rate of VAT @ 15% Rate of VAT @ 15%
Total value : Tk 220+33=
Total VAT : Tk 33 Total VAT : Tk 27
253 VAT Rebate : 27
Net Vat : (33-27)=6
VAT Rebate : 24
Net Vat : (27-24)=3
Vat Paid value : Tk 253 Vat Paid value : Tk 207
VAT Authority
Value Added Tax Authority and officers thereof (S-78)
1. Chief Commissioner, VAT;
2. Commissioner, VAT;
3. Commissioner,(Appeal), VAT;
4. Commissioner, LTU, VAT;
5. Director General, Central Intelligence Cell;
6. Director General, Audit, Intelligence and Investigation Directorate, VAT;
7. Director General, Customs, Excise and VAT training academy;
8. Additional Commissioner or Additional Director General or Director (CIC), VAT
9. Joint Commissioner or Joint Director (CIC) or Director VAT;
10. Deputy Commissioner or Deputy Director, VAT;
11. Assistant Commissioner or Assistant Director, VAT;
12. Revenue Officer, VAT;
13. Assistant Revenue Officer, VAT;
14. Any other officer appointed by the Board;
Duties/power and responsibilities of the VAT Authority: (S-79, 80):

• The Board shall carry out all the function, including the policy
making functions, and discharge all the duties and exercise all
the power of the VAT Authority;
• Tax collection and activities relating to keeping accounts
thereof;
• Apply the administrative function;
• Power to enter and search by VAT officers;
• Seizure of goods and disposal thereof;
• Any other function or duties and responsibilities assigned to
them by the Board.
VAT Act & Rules
Value Added Tax & Supplementary Duty Act 2012:
> Section -139
> Chapter : 18
> Schedule : 3
Value Added Tax & Supplementary Duty Rule 2016
> Rule :117
> Chapter: 18
> Several VAT Forms (Apx. 75)
Different VAT SRO , General Orders & Case Law
Definition Section -2
Definition _Section_2
Money [S-2(5)]: means any existing legal tender the of Bangladesh
or of any other country, and also includes the following instruments
namely:
• Negotiable instrument;
• Bill of exchanges, promissory note, bank draft, postal order,
money order, etc;
• Credit card or debit card; or
• Any supply made through account credit or debit;

Continue….
Definition _Section_2
• Input Tax [S-2(19)] : Means the value added tax imposable on any
taxable supply of any goods or services or immovable property including
the value added tax imposable on the taxable supply of imported goods
or services ;

• Output tax [s-2(20)]: means the value added tax payable by any person
for any of the following activity, namely:
• Supply of any taxable goods or services or property by such person;
or
• Import of any taxable goods or services by such person;
Continue….
Definition _Section_2
Withholding entity [S-2(21)]: means –
• a government entity;
• an non- government organization approved by NGO affairs
Bureau or Directorate of Social Welfare;
• a bank, insurance company or similar financial institution;
• a post-secondary educational institution;
• a public limited company; or
• an establishment registered under large taxpayers’ unit VAT;
Continue….
Definition _Section_2
Tax period [s-2 (30)]: means :

• In relation to VAT and supplementary duty, one or more

than one month of the Christian Calandra ; or

• In relation to turnover tax, every three month period ending

on 31 March, 30 June, 30 September or 31 December;
Continue….
Definition _Section_2
Tax benefit [S-2 (34)]: means any one of the following benefits,
namely :
• a reduction in the output tax liability;
• a reduction in the VAT liability on an import of goods;
• an increase in an excess carried forward or a reduction in the
payable tax amount;
• an increase in the entitlement to a decreasing adjustment;
• a decrease in an increasing adjustment;
• a refund of tax;
• an understated turnover shown by a turnover taxpayer;
Continue….
Definition _Section_2
Registration threshold [S-2(57)] : means the limits of Taka 3 coro as
net turnover of an economic activity of any person, in 12 month
period, but does not include the following amounts, namely :

• the value of an exempted supply;

• the value of sales of a capital asset;
• the value of supply made for selling of an economic activity or any
part thereof;
• the value of supply made as consequence of permanently ceasing
to carry on an economic activity;
Continue….
Definition _Section_2
• Fair market price [S-2(58)] : means:
• The consideration the supply would fetch in an open market transaction
freely made between persons who are not associates; or
• If it is not possible to determine a fair market price under paragraph
(a), the consideration a similar supply would fetch in an open market
transaction;
• If it is not possible to determine a fair market price by above methods,
it may be determined using any method approved by the Board for
calculating an objective approximation of the consideration the supply
would fetch in an open market transaction freely made between
persons who are not associates ;
Continue….
Definition _Section_2
Goods [S-2(60)]: means, other than share or stock or security or
money, all kinds of tangible movable property;

Representative [S-2(63)] : means

• for a disable individual, a guardian or a manager appointed by him;
• for a company other than a company in liquidation, the chief executive
officer of the company;
• for a partnership, a partner in the partnership;
• for a trust, any trustee of the trust or an executor or administrator of
such trust;
• for a government entity, the chief executive officer of the entity;
• for foreign Government, an officer appointment by it ;
• for a non-resident, any VAT agent appointed by it ;
• any other prescribed representative;
Continue….
Definition _Section_2

Person [S-2(74)] : means any individual, and also includes the following
entities, namely –
• company ;
• an association of persons;
• a government entity;
• a foreign Government or a department designed by it or any officer
appointment by it ;
• a public international organization; or
• a property development joint venture or any other similar venture ;
Continue….
Definition _Section_2
Adjustment event [S-2(87)] : means any one of the following events, namely –

• cancellation of any supply ;

• alternation in the amount of consideration for any supply;
• return of any supplied goods or any part thereof to the supplier;
• conversion of a supply into zero-rated or exempted one as result of
alteration in the nature of such supply; or
• any other prescribed event;
Continue….
Definition _Section_2

• Second-hand goods [S-2(98)] : means any such goods that used before,
but does not include any valuable metal or any goods made of such
valuable metal (such as: gold, silver, platinum or any other similar metal),
and any diamond, rubies, emeralds or sapphires ;

• Services [S-2(99)] : means any service but do not include any goods or
immovable property or money ;
Questions Answer
Next Class Content

❑ Imposition of VAT
❑ Registration and Enlistment;
❑ Turnover Tax;
❑ Input Tax Credit.
THANKS & SEE YOU NEXT CLASS