Sub-contractors ineligible for export benefit: NBR
Local sub-contracting firms are not eligible for duty drawbacks on goods and services they supply to public projects, which are funded by foreign loans or grants, clarified the National Board of Revenue (NBR) last Thursday.
Only those local firms, which originally got work orders for providing the goods and services, will be able to get the benefit, it said.
Duty drawback is a refund of duties and taxes paid on inputs or raw materials used for the manufacture of exported goods and services. The term drawback is used exclusively for refund of duties and taxes against export, according to the NBR.
Goods and services that local firms provide to projects having the said characteristics are treated by the NBR as exports.
The NBR has been providing the privilege since fiscal 2010-11 to give the local firms a competitive edge in bidding with international entities in such projects.
However, some sub-contracting firms are trying to evade taxes by seeking duty drawbacks, claiming that their supplies to such project were exports, noted the revenue authority.
Such projects bring in foreign currency for the government just once and hence firms that originally win the supply bid are given the export benefit, said the NBR.
With foreign currency not coming in a second time for the government, there is no scope to consider secondary supplies of sub-contractors as export, it added.
“This has huge implications from the viewpoint of revenue collection,” said a senior NBR official seeking to remain unnamed.
Numerous projects costing a huge amount of money are currently being implemented by the government, including the Padma rail, Karnaphuli tunnel and Dhaka metro rail.
The NBR also said firms not abiding by Public Procurement Rules 2008 in tendering processes would not be eligible for the export benefit.
It directed all VAT field offices to conduct intensive monitoring to realise revenue from such firms, through auditing if necessary.
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