New measures to cut hassles of businesses

Businesses will benefit from the withdrawal of a requirement to get price approval from the VAT authority prior to sales of goods, PwC Bangladesh said yesterday.

At present, businesses need to get the prices of goods approved by the VAT authority before they can put them up on the shop floor.

In his budget speech for fiscal 2016-17, Finance Minister AMA Muhith abolished the provision.

The move is part of Muhith's attempts to run some of the provisions of the VAT and Supplementary Duty Act 2012, whose implementation has been postponed for the second time, from the new fiscal year.

The full implementation of the law has been deferred by one year to July 2017.

“It would reduce the hassles of dealers as well as litigation on the valuation of goods,” Prabir Mitra, manager for indirect tax of Tax & Regulatory Services at PwC, said at a media briefing in Dhaka.

PwC, a tax and consulting service provider, with its presence in 158 countries, organised the briefing at its office in Dhaka to share its analysis on the budget for fiscal 2016-17.  Businesses would still need to fill in the price declaration forms with the VAT authority.

If irregularities are detected during declaration, the VAT commissioners will have the authority to take necessary corrective measures against the businesses.

Another feature of the new VAT law is single registration for a single business entity or its group of entities.

At present, firms, especially those having outlets, need to get separate registrations from field offices of VAT for every unit they have in operation.

From fiscal 2016-17, a single registration would suffice. “This will also help business reduce the cost of compliance,” PwC said.

But businesses will have to maintain proper books of accounts in a single premise.

“Such amendment may allow a group of companies under single ownership to claim input tax credit and utilise such credit across group entities,” PwC said.

The move has also curtailed the discretionary powers of VAT officials.

Under the existing law, revenue officials can disallow input-tax credit taken by firms. Businesses can appeal against it only to senior officials and their decisions stand final.

From next fiscal year, VAT officials will have to hold a hearing for firms before cancelling or adjusting the input tax credit. “Such a move would also reduce the hassles for businesses,” PwC said.

On direct or income tax, Sushmita Basu, tax and regulatory services director at PwC Bangladesh, said tax measures have been taken in a way that facilitates tax base expansion and improve compliance.

There is stringent compliance requirement in the budget, she said, citing provisions that individuals who have gross wealth of upwards of Tk 20 lakh at the end of the year will have to give statements on assets and liabilities.

Persons owning cars or having investments in housing property or apartments in city corporation areas will also have to submit the statements.

For companies, expenditure on salaries will be disallowed if employees do not obtain electronically generated 12-digit taxpayer identification number, said PwC.

Also, the applicable tax deducted at source rate will rise by 50 percent in most cases where the payee does not have an e-TIN, said PwC.

Basu said focus has also been given to monitoring whether source tax is being properly deducted and deposited to the state coffers.

Mamun Rashid, managing partner of PwC Bangladesh, said they reported the tax authority that an actual amount of source tax was not being deposited.

Basu also said the corporate tax rate cut to 20 percent from 35 percent for the garment sector will encourage foreign investment.