Refund of advance VAT or turnover tax from Government treasury
Bangladesh has proudly graduated from the LDC and now SDG or Ease of Doing Businesses are the beacons or lighthouses Bangladesh is proceeding towards. To make Bangladesh a manufacturing hub, imports are still an integral part of the journey towards this development. An importer is required to pay Advance Tax (AT) at import stage at the rate of 5% on the taxable value of imported goods, which seems to be an obstacle for Bangladesh to overcome in the Ease of Doing Business indicator of World Bank. This requirement of payment of AT is the introduction of one of the unique features of the Value Added Tax and Supplementary Duty Act, 2012 (VAT & SD Act) and the Value Added Tax and Supplementary Duty Rules, 2016 (VAT & SD Rules) both of which came into force on July 1, 2019.
Initially, the business communities and the associations opposed this inception strongly as they articulated that most of the importers' import of goods lie with having credit facilities from the banks, therefore cost of doing business will increase manifold if some amount is paid in advance and kept in the custody of the government for some time. Though the Revenue authority said that this introduction of AT will widen their expansion of network as well as will help them to obstruct money laundering through mis-invoicing, the entrepreneurs and manufacturers had been demanding withdrawal as the payment of AT will increase their cost of production. They will be in trouble to repay to their banks and the paid AT which is unadjusted will be stuck in the government treasury for quite some time. Worthy to mention that, this payment of Advance Tax is refundable and the concerned importer can adjust such advance tax as a decreasing adjustment in that tax period or subsequent 4 (Four) tax periods. If not adjusted, the businesses will have to apply to the relevant Commissionerate. But when the importers are seeking refund to the Commissionerate, in practice, the Commissioners are becoming unable to refund suo moto and then the importers do not have any other option but to go for writ for the refunds. This necessity of taking resort to litigation is putting burden on the importers.
Once the processes of application have been followed by the importers properly, the Commissioner is bound to refund the amount within three months after the application for refund has been made to the Commissioner. Not refunding the same by the Commissioner within this stipulated time is violative of the fundamental rights of the importer.
According to one provision, any person who has paid an AT but is neither registered nor enlisted may' in the prescribed manner' make an application to the Commissioner for a refund of such advance tax and the Commissioner shall, after receiving such an application, dispose it in the prescribed manner. The language of these subsections imply that the Commissioner is bound to refund the AT if any application for refund is made by neither a registered nor an enlisted person. Would a Commissioner be bound if application is made by a registered or an enlisted person? It is legally presumable that a Commissioner should be bound. But in reality, this is not happening and the business concerns are not getting refunded easily.
Some unnecessary burdens have been imposed on the importers for seeking refund of the AT. Concerns like House building, Land Development, or Property Development get facilities of adjusting in the Returns indefinitely and can apply for refund any time, but for all other business concerns, the excess amount of money after adjustment in the monthly Returns (Mushak-9.1) shall be carried forward and may be deducted over the following 6 (six) tax periods, after which any remaining excess money shall be refunded in accordance with the provisions of this Act. It is recommended that, all concerns should get similar facility of adjusting in the Returns indefinitely and should be given chance to apply for refund anytime. Or the Commissioner will refund the amount to the importers suo moto after 6 (six) tax periods has been adjusted in Return.
AT is like guarantee of a due and the guarantor should get redemption once the due is paid. Once the due is paid, process of redemption should be a smooth one. Therefore, refund in relation to paid AT should also be a simple process. In the above circumstances, some more Recommendations are: Manufacturers should be exempted from paying AT; only Commercial importers or traders may be burdened with such imposition; the commissioners should have the sole discretion to recommend for refund of the AT and the recommendations of the Commissioners should be given priority by the VAT Enforcement Department of NBR.
The writer is an Advocate of Bangladesh Supreme Court having expertise in Revenue laws and a Regional Representative (North Asia) of ICC YAF.