Around Tk 200 crore is likely to be left unspent under the VAT Online Project (VOP) as some of the planned components have been made redundant for amendments brought to the VAT law, said officials.

So far, Tk 256 crore could be spent out of the total estimated cost of Tk 690 crore for the much-talked-about initiative taken by the government to automate the value-added tax (VAT) system in order to increase revenue collection.

"It will not be possible to accomplish some tasks, such as (development of a) human resource software and training within the deadline of the project," said Project Director Kazi Mostafizur Rahman.

Rahman shared the update after seeking an extension of the VOP completion deadline from the National Board of Revenue (NBR) and World Bank to June 2021 from December 31.

"We will be able to complete all the components if we get time until June next year," he said.

The government took up the VOP in 2013 to implement the VAT and Supplementary Duty Act 2012, end the manual system involving VAT collection and replace a more than two decades' old VAT law.

The idea was also to reduce the cost of businesses, improve compliance and increase revenue collection in the country, which has the lowest tax-GDP ratio in South Asia.

Initially, the NBR had planned to start with a uniform 15 per cent VAT rate on all goods and services, moving away from multiple VAT rates.

But its enforcement was delayed on several occasions for lack of preparedness of the revenue administration and opposition from businesses, particularly from the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).

The government finally began to implement the law from July 2019 with multiple VAT rates to appease businesses.

Rahman said the extension was required as activities under the VOP remained almost suspended for two years because of delays in implementation of the law and a two-month general holiday amid the outbreak of the pandemic in the country from early March.

"If the project ends now, we will have half of the target accomplished," he said, adding, "We want hundred per cent output."

Financed by the World Bank, the VOP has to develop 16 modules, and all the modules are not yet ready. Only five, including two involving VAT registration and returns, are completely ready.

"We have readied another five modules but could not complete testing," he said.

Rahman said they had developed processes for running almost all of the components, except for those involving risk management and audit.  It will take more time to develop these two modules, he said.

The head of the VOP, citing discussions with the WB, expected that multilateral lender would grant an extension of the completion deadline of the project.

The government approved the VAT automation project in 2014 and later hired Vietnam-based FPT Information System Corporation to develop the integrated VAT administration system software (IVAS) & network services and produce hardware.

Under the VOP, the NBR aims to connect its 12,287 VAT circles, 84 divisional offices, 12 commissionerates and other VAT related offices under a single platform. 

It also aims to integrate with Bangladesh Bank, the Office of the Comptroller and Auditor General and the income tax department with a goal of increasing revenue collection, according to the NBR.