No headway in new VAT law implementation

No notable progress has been made in narrowing down the differences between businesses and the revenue authorities on the VAT law 2012 although one year has passed since the government deferred its implementation by two years.

The plan to automate the VAT system under the existing law is yet to take off as the National Board of Revenue could not finalise the revised rules owing to opposition from the Federation of Bangladesh Chambers of Commerce and Industry.

As of now, there has been some headway in only two areas.

The government has revised upwards the cost and tenure of the VAT Online Project (VOP) that it took in 2013 to implement the new VAT and Supplementary Duty Act 2012 through automation of the VAT system.

The cost of the scheme has increased 25.11 percent to Tk 690 crore. Its tenure has been extended until 2020.

And the NBR formed a joint panel with representatives from the FBCCI to review the Act and resolve the standoff related to the new VAT law.

Since April 30, the panel has held two meetings, where it was decided that a study on the impact of the much-talked about Act on business and the economy would be recommended.

It was also decided to make forms under the existing VAT law 1991 compatible with the online system, incorporate good provisions of the new law in the incoming fiscal year, according to minutes of the first meeting held on April 30.

Contacted, NBR Member VAT Policy Md Rezaul Hasan said digitisation of the VAT system did not go as planned because of the delays in finalisation of rules under the present law.

“We are going to include provisions to facilitate online registration and online return submission under the 1991 law in fiscal 2018-19.”

Registration and return submission forms are different between the two laws, said Hasan, also the project director of VOP.

The online system was developed based on 2012 VAT law and forms were prepared in line with the latest legislation.

Since the implementation of the law was deferred, the forms will now be incorporated in the 1991 law so that firms can submit returns online from next fiscal year.

“We want to start piloting the online return submission at the Large Taxpayers Unit VAT from July,” he added. Taxmen said the NBR prepared the draft for amending VAT rules of 1991 in August last year after the government deferred the implementation of the new law for two years in the face of opposition from businesses.

Some revenue officials said amendments were planned based on verbal consent from representatives of the FBCCI to review the new law. 

But the country's apex trade body opposed the amendment on the ground that some provisions of the VAT law 2012 were included. It was given the draft of the amendment for its feedback.

“This is undesirable,” said FBCCI President Md Shafiul Islam Mohiuddin in a letter to NBR Chairman Md Mosharraf Hossain Bhuiyan in February.

The apex body said approval for the amendment was taken from the finance minister before taking its views.

The FBCCI said the VAT software has not been customised in line with the 1991 law.

The apex chamber cited various shortcomings of the existing VAT online system and added that it would not be wise to proceed with the plan to digitise the VAT return system without addressing the problems.

On the issue of sluggish progress, Ahsan H Mansur, executive director of the Policy Research Institute, said the momentum of automation of revenue administration could not be sustained because of opposition from the FBCCI.

“Some rules and forms need to be changed to go for online. But this is being blocked. No reform could be done if the NBR has to proceed in line with views of the FBCCI,” he added.

The FBCCI president was not found available for comments yesterday.

While the government has a stated position to implement the VAT and SD Act 2012 from July 2019, it is critical that the implementation is not deferred further, said Towfiqul Islam Khan, research fellow of the Centre for Policy Dialogue.

As part of the preparation, the implementation of online VAT registration and filing system and digitisation of VAT process and bringing in more businesses under the system should be given priority, he said.

The finance minister may consider sharing his proposals on the implementation plan of the new VAT law, including the debated issues, in the forthcoming budget sessions, Khan added.