Compilation of VAT Act 1991 Theory & Math PDF

TAXATION
Value Added Tax – Theory and Illustrative examples
Compiled by:
Md. Ibne Nayeem Hasan
Sagar Chandra Mondal
KPMG in Bangladesh
Rahman Rahman Huq, Chartered Accountants
Acknowledgement & Disclaimer: This study material is the compilation of theory and
math based on Value added tax Act, 1991 of Bangladesh. Theories and Math are taken
from synopsis provided by the renowned faculty. We are indebted to them. Reader
should apply cautions while using any part of this study material as reference.
Table of Contents
 1. Definition of VAT ............................................................................................................................ 4
 2. Identify the differences between VAT & Sales Tax ..................................................................... 4
 3. Discuss the Advantages & Disadvantages of VAT ....................................................................... 5
 4. Justification/reasons for introduction of VAT in BD: ................................................................. 5
 5: Scope of VAT in Bangladesh ......................................................................................................... 6
 6. Essential Features of VAT: ............................................................................................................ 6
 7. Types of VAT: ................................................................................................................................. 6
 8. What is VAT Mechanism? ............................................................................................................. 6
 9. Formula/alternative of VAT calculation:...................................................................................... 7
 10. Consequence of failure to pay VAT............................................................................................. 7
 11. Determination of Value at Import Stage ..................................................................................... 7
 12. VAT Authorities ............................................................................................................................ 8
 13. Changes of information relating to registration ......................................................................... 8
 14. List of goods exempted from VAT............................................................................................... 8
 15. List of services exempted from VAT ........................................................................................... 9
 16. Documents to be submitted for VAT registration ...................................................................... 9
 17. Definitions:................................................................................................................................... 10
 18. Imposition of Value Added Tax. ................................................................................................ 11
 19. Person required for registration ................................................................................................ 12
 20. When registration is required? .................................................................................................. 12
 21. What is compulsory registration?.............................................................................................. 12
 22. What is self-registration? ........................................................................................................... 13
 23. Registration cancelled for the purposes of VAT? .................................................................... 13
 24. Transfer goods from central godown or from one center to another? ................................... 13
 25. Offences and penalties. ............................................................................................................... 14
 26. Mention the provision when submission carried on without VAT. ........................................ 16
 27. Name the importers who are exempted from registration requirement? .............................. 16
 28. Cottage industry in our VAT law. ............................................................................................. 16
 29. VAT administration. ................................................................................................................... 16
 30. Books and Documents Require to be Maintained for VAT Purposes:................................... 17
 31. Time Limit for Submission of Application for Drawback/Refund of VAT Rule 30(1). ....... 17
 32. Registration under VAT: Sec 15. ............................................................................................... 18
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Md. Ibne Nayeem Hasan, ibnenayeem@gmail.com
Sagar Chandra Mondal, sagar17.du@gmail.com
 33. Exemption from Registration; Sec 16 ....................................................................................... 18
 34. Time and mode of payment of VAT. ......................................................................................... 18
 35. Description of deduction of VAT at source............................................................................... 19
 36. Who will need to pay VAT? ....................................................................................................... 19
 37. Determination of Value for imposition of VAT. ....................................................................... 19
 38. Mention 10% sources of VDS. ................................................................................................... 20
 39. Information relating to price Declaration: ............................................................................... 20
 40. Provision relating to Trade Discount: U/r-3(6) ........................................................................ 21
 41. Persons Responsible for Deduction of VAT.............................................................................. 21
 42. Special treatment of Specified “Input Tax”.............................................................................. 21
 43. Penalty for False Declaration of Input Tax .............................................................................. 21
 44. What is meant by input? Input tax?.......................................................................................... 21
 45. How input tax can be taken?...................................................................................................... 21
 46. Consideration to be fulfilled for rebate. .................................................................................... 22
 47. Which tax payer cannot obtain rebate? .................................................................................... 22
 48. Whether rebate on VAT, ID, SD and AIT can be obtained? .................................................. 22
 49. Benefit of input tax rebate. ......................................................................................................... 22
 50. Restrictions relevant to individuals enlisted for turnover tax payment. ................................ 22
 51. Books and Records to be maintained by the Turnover Tax Payer. ........................................ 22
 52. Whether turnover tax (TOT) can be deducted at source? ...................................................... 23
 53. Tax period of people enlisted for TOT? .................................................................................... 23
 54. In what process turnover tax of a definite tax period is to be paid? ...................................... 23
 55. What is Turnover Tax (TOT)? .................................................................................................. 23
 56. Penalty of nonpayment of Turnover Tax (TOT)? .................................................................... 23
 57. Penalty for false declaration of Turnover Tax. ........................................................................ 23
 58. Difference between VAT & Turnover Tax. .............................................................................. 23
 59. Supplementary Duty? ................................................................................................................. 24
 60. What is truncated value? ............................................................................................................ 24
 61. VAT assessments/duties and responsibilities of VAT assesse. ................................................ 25
 62. Discuss some important features of VAT in Bangladesh......................................................... 25
 63. What are the different types of value added tax? .................................................................... 26
 64. What do you mean by presumptive/Fixed VAT? ..................................................................... 26
 65. Areas of registration is required for the purpose of VAT. ...................................................... 26
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 66. Applicable rate of VAT deduction or collection at source for the following cases: .............. 26
 67. Documents need to be submitted for VAT registration &Time of registration cancelled. ... 27
 68. Under what situations, Input Tax Credit is not allowed VAT Act, 1991? ............................. 27
 69. Duties and responsibilities of VAT assesse? ............................................................................. 28
Additional .................................................................................................................................................. 29
Examples of VAT Math ............................................................................................................................ 33
1. Sun Moon Company ..................................................................................................................... 33
2. Rahman Industries Limited ......................................................................................................... 34
3. A manufacturer ............................................................................................................................. 34
4. An importer ................................................................................................................................... 35
5. Shova Enterprise Ltd .................................................................................................................... 36
6. Importer Mr. Akbar ..................................................................................................................... 37
7. Unicom Bangladesh Ltd. .............................................................................................................. 38
8. ABC Ltd. ........................................................................................................................................ 39
9. Excellent Shoe Co. Ltd.................................................................................................................. 40
10. ABC Ltd. .................................................................................................................................... 41
11. Rahman International Pvt. Ltd. .............................................................................................. 42
12. Mr. Habib .................................................................................................................................. 42
13. AB Ltd. ("Company") .............................................................................................................. 43
14. Three persons ............................................................................................................................ 45
15. Tabia Limited ............................................................................................................................ 47
16. Exchange Rate ........................................................................................................................... 52
17. Biki (Bangladesh) Co. Ltd. ....................................................................................................... 52
18. XYZ Ltd. .................................................................................................................................... 53
19. A manufacturer ......................................................................................................................... 54
20. SOS Company ........................................................................................................................... 55
21. Manan Traders.......................................................................................................................... 56
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Historical Background of VAT
Value Added Tax is an indirect and consumption tax that is placed on a product or service when value is
added at each stage of production and final sale. The Value Added Tax Act, 1991 was introduced in
Bangladesh in July, 1991. It is in vogue in Bangladesh for the last 22 years. During this period, a
number of distortions gradually have crept into the system; namely: cascading effect, tariff value,
truncated value base, Maximum Retail Price-based value, price declaration, Advance Trade VAT
(ATV) at import stage, definition of services, deduction of VAT at source etc. In order to
eradicate such problem of VAT Act, 1991, a new law (Value Added Tax Act, 2012) has been
passed in the parliament although it is waiting for implementation. Therefore, we compiled this
manual on the basis of VAT Act 1991.
Value Added Tax covering FY 2016-17

 1. Definition of VAT
Value Added Tax (VAT) is a tax, which is charged on the "increase in value" of goods and services at
each stage of Production and circulation.
The "value added" to a product by a business is the sale price charged to its customer, minus the cost of
materials and other taxable inputs. The consumer ultimately pays a higher price for the taxed commodity.
VAT is essentially a hidden sales tax or consumption tax. From the perspective of the
 buyer, VAT is a tax on the purchase price;
 seller, VAT is a tax only on the “value added” to a product, material or service.
The rates of VAT are as follows:
Particulars Rate of VAT
Standard Rate 15%
Export and Deemed Export 0%
Business (other than medicine and petroleum) 4%
Business (Medicine and Petroleum) 2%
Turnover Tax 3%
Service 1.5%, 2%, 2.5%, 4%, 4.5%, 5%, 5.5%,

6%, 9%, 10%, 15%
 2. Identify the differences between VAT & Sales Tax

VAT: VAT is a simplified and transparent system of tax in which tax is levied on the value additions, at
each stage in the production-distribution with provision of set-off of tax paid on earlier stage.
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Sales Tax: Sales tax is the tax which is collected and remitted to the government only once, at the point
of purchase by the end consumer. It is levied on the total value of the exchange.
SL# VAT Sales Tax
1. VAT is multi point levy Sales tax generally single point tax.
2. In VAT full set-off of the tax paid at the earlier In Sales Tax no tax is being levied on the
stage is granted value addition on subsequent sales.
3. VAT eliminates tax cascading. Sales tax does not eliminate cascading effect
of tax.
 3. Discuss the Advantages & Disadvantages of VAT

Advantages of VAT are as follows:
 VAT system acts as a supplementary tax that can help make up for revenue loss due to income
tax evasion;
 VAT may be selectively applied to specific goods or business entities as a control mechanism. It
may healthy economy – by taxing only consumption;
 Compared with alternatives in indirect taxation, the VAT has more revenue potential;
 It is more equitable and transparent.
Disadvantages of VAT are as follows:
 The VAT has criticized as the burden of it relies on personal end-consumers of products and
therefore a regressive tax ( the poor pay more, in comparison, than the rich);
 Revenues from a VAT are frequently lower than expected because they are difficult and costly to
administer and collect;
 VAT increases inflation.
 4. Justification/reasons for introduction of VAT in BD:
Accepting recommendations of the Bangladesh Tax Mission, the Government set forth the following is
for the VAT:
I. To do away with the cascading effects that happens because of taxation of inputs.
II. To generate more internal resources than that Excise Duties and Sales Tax used to provide.
III. To introduce VAT as the main vehicle for resource mobilization.
IV. To adopt a flat rate of taxation on a broader base, covering a wide range of goods excepting the
primary agricultural products.
Further the National Board of Revenue pointed out that the objectives behind introducing the value added
taxation were:
I. bringing transparency in the taxation system;
II. prohibiting cascading taxation at different stages of production;
III. thoroughly integrating the tax administration;
IV. activating the overall economy by mobilizing more internal resources and
V. Bringing the consistency in the Tax to GDP (gross domestic product) ratio.
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Moreover, it is argued by tax officials that the objectives of introducing VAT are also as follows:
I. It would augment tax revenue earning of the government.
II. It will abolish tax on tax.
III. It will ensure more simplification.
IV. It would facilitate improvement of equitable and efficient distribution of reserves.
V. It would facilitate broadening of tax base.
 5: Scope of VAT in Bangladesh
The scope of VAT is as follows:
 Value added Tax Act, 1991;
 Value added Tax Rules, 1991;
 Finance Act;
 SRO (Statutory Regulatory Orders);
 VAT Case Law.
 6. Essential Features of VAT:
 VAT is imposed on goods and services at import stage, manufacturing, wholesale and retail
levels;
 A uniform rate of 15% is applicable for both goods and services;
 VAT is compulsory for whole sellers/retailers (for selected item);
 VAT is applicable for all goods and some listed services (except agricultural products and
exempted goods and services);
 Exports are zero (0%) rated;
 VAT is payable at the time of supply of goods and services;
 Turnover Tax @ 3% is leviable where turnover amount is less than Tk. 80 lac;
 Some industries like Agro-based, Cottage industries are exempted from VAT;
 Tax paid on inputs are creditable against output tax;
 Tax returns are to be submitted on monthly or quarterly or half yearly basis as notified by the
Government;
 Luxurious and socially undesirable goods are subject to supplementary duties at different rate
ranging from 0% to 500%.
 7. Types of VAT:
According to the provisions of the VAT Act 1991, three different types of taxes are charged:
 Value Added Tax
 Turnover Tax
 Supplementary Duty
 8. What is VAT Mechanism?
The value added, in turn, can be defined in two alternative ways:
 First, value added is equivalent to the sum of wages to labour and profits to owners of the
production factors including land and capital.
 Second, value added is simply measured as the difference between the value of output and the
cost of inputs.
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 9. Formula/alternative of VAT calculation:
The two ways of definition of value added give rise to three major alternatives for computing the VAT
liability as described below:
a) The addition Method: The value added is computed by adding all the payments that is payable
to the factors of production (wages, salaries, interest payment etc.);
b) The Subtraction Method: The tax liability at any stage is equal to the tax rate multiplied by the
tax base or value added measured as the difference between the values of outputs and inputs;
c) Tax Credit Method: Under the tax credit method, a firm at any stage of the production-
distribution chain charges its customers the VAT on its output, submit the tax to the treasury, and
then claims for the VAT already paid on its input purchase. This is the most common method of
the VAT computation.
The final result of determining VAT liability will be all the same whatever the computing method is used
from the above mentioned alternatives.
 10. Consequence of failure to pay VAT
In order to recover arrear VAT, the authorities can –
a) Take steps to deduct the amount from any other Custom, Excise, VAT or income tax owing
money to the defaulter;
b) Freeze bank accounts by serving notice;
c) Stop business transactions and seize vehicles until arrear is realized;
d) Take steps to realize the arrear by seizure of other goods of the person in default;
e) File certificate case.
 11. Determination of Value at Import Stage
In Financial Year 2016-17 Government has imposed 25% Custom Duty (CD), 5% Regulatory Duty (RD),
20% Supplementary Duty (SD), 15% VAT and 5% AIT on Product “X”. Invoice value of the product at
import stage of Tk. 45,000 and Assessment Value (AV) of Tk. 50,000. The goods are imported by an
importer on the basis of Pre Shipment Inspection (PSI). What are the applicable Tax and Charges in the
importing stage of the goods?
Answer: The Applicable Tax and Charges in the importing stage of the goods are as follows:
Tax/Charge Tax/Charge
Tax/Charge Basis of Tax/Charges Base Value
Rate (Tk.)
CD AV 50,000 25% 12,500
RD AV 50,000 5% 2,500
SD AV+CD+RD 65,000 20% 13,000
VAT AV+CD+RD+SD 78,000 15% 11,700
Advance Income Tax

AV 2,500
(AIT) 50,000 5%
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Advance Trade VAT
(AV+CD+RD+SD)*1.2667 3,952
(ATV) 98,803 4%
PSI Service Charge AV 50,000 1% 500
Since the goods are imported by the commercial importer and included for compulsory PSI, so ATV and
PSI is applicable @ 4% and 1% respectively for the above goods.
 12. VAT Authorities
The following are the VAT Authorities under section 20 of the VAT Act, 1991 after the National Board
of Revenue:
1. Member, VAT;
2. Chief Commissioner, VAT;
3. Commissioner, VAT;
4. Commissioner (Appeal), VAT;
5. Commissioner, Large Tax payers’ Unit, VAT;
6. Director General, Central Intelligence Cell;
7. Director General, Audit, Investigation and Inspection Directorate, VAT
8. Director General, DEDO, VAT;
9. Additional Commissioners or Additional Director General, VAT;
10. Joint Commissioner or Director, VAT;
11. Deputy Commissioner or Deputy Director, VAT;
12. Assistant Commissioner or Assistant Director, VAT;
13. Superintendent, VAT;
14. Inspector, VAT;
15. Any VAT officer of another designation;
 13. Changes of information relating to registration
If a registered person intends to change the name, address or any information given in the application for
registration, he shall inform the concerned officer of such change at least fourteen days before the date of
such change.
 14. List of goods exempted from VAT
On VAT Act, 1991, following goods have been exempted from VAT:
 All exports, deemed exports and foods for consumption outside Bangladesh and other goods
supplied to an outgoing conveyance.
 Goods and services under the Turnover Tax.
 All Goods as listed in the Second Schedule of the Narcotics Control Act, 1990 (Act No. 20 of
1990), in case of production and manufacturing thereof in Bangladesh. Some of the examples are
native liquor, Methane alcohol, Ratified spirit, Foreign liquor produced in Bangladesh, Denatured
spirit etc.
 Goods listed against some specific Headings in the First Schedule of the Customs Act, 1969
under Harmonized Commodity Description and Coding System. Some of the examples are live
animals and meats thereof, Live fish (excluding ornamental fishes), natural honey, live tree plants
and seed, vegetables, fruits, Ivory, tortoise shell, whalebone and whalebone hair, horns, antlers,
hooves, nails, claws and beaks etc. subject to certain conditions.
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Besides this, different circulars and SROs are issued from time to time declaring names of new goods
exempted from VAT and SD.
 15. List of services exempted from VAT
According to the Schedule Two of the VAT Act, 1991, certain services classified under 7 heads have
been exempted from VAT under categories:
1. Basic services essential to life;
2. Social Welfare Services;
3. Culture Oriented Services;
4. Finance and Finance Related Services;
5. Transport Service;
6. Personal Service;
7. Other Services.
The detail of the list is updated year to year through Finance Act and different SRO’s. The updated list
can be found from the website of the NBR.
 16. Documents to be submitted for VAT registration
Application for VAT registration shall be made to the VAT Divisional Officer in Form VAT-6. The
following documents shall be submitted along with the application form:
a) Updated Trade License;
b) Passport size Photograph of Chairmen/MD/Owner & Authorized Signatory;
c) TIN Certificate (if any)
d) National ID Card
e) Bank Account Certificate;
f) IRC/ERC Certificate (if any)
g) List of all related Selling Centers in the case of “central registration”;
h) Declaration in Form VAT-7 of the production or business premises, plant, machinery, fittings,
finished or tradable goods, stocks and inputs.
i) Blue print of Business Premises
j) Documents related to Ownership/Rent of Land/Household/Building/Premises;
k) Authorization letter for Authorized Signatory;
l) MOA & AOA for Limited Company;
m) Partnership agreement in case of Partnership Business.
If the application is complete, the VAT Divisional Officer shall issue the Certificate of Registration in
Form VAT – 8 within 2 days of the application.
No fee is payable for registration for the purposes of VAT.
If a person carries out business from various premises, he may obtain “central registration” so as to pay
VAT; and complies with the requirements of the VAT laws “centrally”. However, no “group” (that is
various companies/entities under common management or ownership) registration is permissible under
VAT Act, 1991.
If “central registration” is not obtained, then separate registration for separate premises shall be required
for the purposes of VAT. However, if a registered person changes his premises or businesses, he will file
declaration with the VAT Circle Office in Form VAT-9 at least 14 days prior to such changes in his
premises or businesses.
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 17. Definitions:
If there is nothing contradictory in the subject or context in this Act.,
a) ‘Exempted’ means goods and services exempted from paying Value Added Tax under this VAT
Act 1991.
b) ‘Output Tax’ means Value Added Tax imposed under the VAT Act 1991.
c) Input means-
i. All kinds of raw materials, packing materials, services and machinery but labour,
land, building office appliances and transport will not be included.
ii. In the case of traders, goods imported, purchased, acquired or otherwise obtained
in any way for sale, commercial transaction or transfer in any manner.
d) ‘Input Tax’ means payable Value Added Tax on imported input by registered person or the input
purchased from any other registered person.
e) ‘Commission’ means the turn-over tax fixation commission formed under section 8A of VAT
Act1991.
f) ‘Tax period’ means a term of one month or such term which may be fixed by the Government for
this purpose by Gazette notification.
g) Taxable good means the goods which are not included in first schedule of VAT Act 1991.
h) ‘Taxable service’ means a service which is included in the second schedule.
i) ‘Commissioner’ means a Commissioner, Value Added Tax appointed under section 20.
j) ‘Current Account’ means an account maintained with the (Collector) by the registered person in
which purchases, sales treasury deposit payable and deductible Value Added Tax and where
applicable, statement of other taxes will be entered.
k) ‘Invoice’ means an invoice provided under section 32 (and any supporting invoice provided with
it).
l) ‘Chairman’ means the chairman of the Commission.
m) ‘Turnover’ means all money obtainable or obtained for the supply of produced or manufactured
taxable goods or taxable services by any person for a particular period.
n) ‘Schedule’ means any schedule annexed to this Act.
o) Documents’ means a paper or anything expressed or stated such as letter, sum, sign or anything
expressed by sign upon any material and any kind of electronic data, computer program,
computer tape, computer disk or anything that contains data will be included.
p) “Commercial documents” means book of accounts, files, documents or papers maintained by a
person to record his commercial transaction showing financial condition of his business, namely:
- debit voucher, credit voucher, cash memo, daily accounts of purchase and sales cash book,
primary or journal book, bank statement and analyses, profit and loss account, profit and loss
appropriation account, bank account reconciliation and balance sheet and all related documents
including audit report.
q) ‘Return’ means the return required under Section 35 of this Act.
r) ‘Fixed date’ means the 15th day after taxable month in the case of return.
s) ‘Goods’ means all kinds of movable property excluding shares, stock, coin, security and
recoverable claim.
t) ‘Producer’ or ‘Manufacturer’ will include any person engaged with the following activity.
I. Any material exclusively or processed with other matter, material or components of
production being assembled or annexed with those creates or transformed it to a different
specific commodity or rendering this material into a changed, transformed, reshaped size
so that it becomes usable for a specific purpose.
II. Any related or incidental processing to complete the manufacture of a commodity.
III. Printing, publishing, lithograph or engraving processes.
IV. Addition, mixing, diluting / cutting, liquefying, bottling, packaging or re-packaging.
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V. The services of any person with power of attorney, trustee, executor, superintendent in
case of bankruptcy of any manufacturer or producer of services of any such person who
virtue of trustworthiness disposes of a taxable person’s assets.
VI. Manufacturing or producing any commodity by using own plant, machinery or equipment
in any other person’s ownership.
u) ‘Trader’ means a person or any organization who, without changing the nature, form or qualities
of any imported, purchased or otherwise acquired, puts them on sale, offers in exchange or for
supply in any other manner for a consideration.
v) ‘Rule’ means any rule made under this Act.
w) ‘Bench’ means bench formed comprised of one or more than one member.
x) ‘Board’ means the National Board of Revenue formed under the National Board of Revenue
order 1972 Order No. 76 of 1972.
y) ‘Person’ means any individual, business organization, group of persons and association.
z) ‘Value Added Tax Officer, means any officer engaged under Section 20 of this Act.
aa) ‘Zero’ rated taxable goods or services means goods or services which are exported or deemed to
be exported or any food or any material as described in sub section (2) of section 3 upon which
value added tax or where applicable supplementary duty will not be imposed and all other taxes
and duties paid on materials used for manufacturing export goods, which was fixed by the
Government according to gazette notification for the purpose shall be refunded.
bb) ‘Member’ means any member of the Finance Commission and also includes the Chairman.
cc) ‘Proper Officer’ means any value Added Tax Officer who has been authorized by the Board in
accordance with a Government Gazette notification issued by the Board to perform any
responsibility under this Act.
dd) ‘Total receipts’ means the total amount of money obtained or due which a provider of taxable
services received in exchange for their services except Value Added Tax.
ee) ‘Supply’ means sale, transfer or exchange for a consideration of goods manufactured or produced
by a manufacturer or producer of goods or of goods imported, purchased or otherwise acquired by
a trader.
 18. Imposition of Value Added Tax.
Different requirements for imposition of VAT are presented below as per section 3 of VAT Act.
1) Value Added Tax will be imposed and payable @ 15% on all goods imported into Bangladesh
except the goods listed in the First Schedule and on all services listed Second Schedule.
2) Without prejudice to the above sub-section (I) Zero rate tax will be imposed on the following
goods or services;
a. Any goods or services exported or deemed to be exported from Bangladesh.
b. Food and other things supplied in transport leaving from Bangladesh for consumption
outside Bangladesh in accordance with section 24 of the Customs Act. 1969.
Provided that this sub-section shall not be applicable to the following goods:
a. Any goods re-imported or intended as being re-imported into Bangladesh.
I. Any goods or services or part of it supplied in exchange of foreign currencies for
consumption or use in Bangladesh.
b. Such goods which have been presented for export in accordance with section [3] of
customs Act but not exported within thirty days of the bill of export or such extended
time allowed by the Commissioner for this purpose.
3) Value Added Tax will be paid by:
a. The importer in the case of imported goods.
b. The supplier in the case of goods manufactured or produced in Bangladesh.
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c. The provider/renderer of services in the case of services; and
d. In other cases, the supplier and services receiver.
4) In the case of any imported or other goods the classification of the goods under the Customs Act
will apply for the calculation of payment of Value Added Tax under this section.
5) The Board may, in the public interest, by notification in the official Gazette:
a. Declare any taxable goods or class of goods as taxable services and any taxable service as
taxable goods, and
b. Provide clarification for the purpose of determining the extent of any taxable services.
 19. Person required for registration
The following persons are required to be registered for the purposes of VAT:
a) Supplier of taxable goods and services;
b) Importer;
c) Exporter;
d) Producer;
e) Trader; and
f) Service provider.
The persons who are falling under the jurisdiction of “turnover tax” and “cottage industry” are not
required to register for the purposes of VAT. However, producer or service provider having turnover
below Tk. 80 lac, thereby falling under the jurisdiction of “turnover tax”, and “cottage industry” may
voluntarily register for the purposes of VAT.
If any person who ought to register for the purposes of VAT fails to do so, the VAT Divisional Officer
registers the person under section 15(4) of the Act effective from the date the person ought to have
registered; and informs the person accordingly.
 20. When registration is required?
A person is required to register for the purpose of VAT at the following time:
a) Produce or manufacture of goods
b) Trading of goods
c) Rendering of services
d) Import of goods
e) Export of goods
Once registered, no renewal of registration is required.
 21. What is compulsory registration?
The importer, exporter, manufacturer and supplier of taxable goods and services whose annual turnover is
not less than 80 lacs need to be registered with concerned Divisional Office of VAT. The steps of
registration are as under:
1. An application in the form of Mushak – 6, is to be submitted to the concerned divisional officer.
2. Documents to be submitted with the application:
a. Up to date Trade License
b. TIN certificate if any
c. Two Copy of Passport size Photographs of Owner/Managing Director
d. In case of Export; renewed copy of ERC
e. In case of Import; renewed copy of IRC
f. Bank Solvency Certificate
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g. In case of Limited company; Memorandum & Articles of Associations, Certificate of
Incorporation
h. In case of partnership firm; partnership0 deed
i. Ownership Deed/Rent agreement of Land/Building/Premises
j. For centrally registration
k. Lay out of Manufacturing/ Business places, the land & Building, the plant &
Machineries, Fittings, details products & the principle inputs as per Mushak – 7 Form.
3. Confirmation of Information by the divisional officer provided in the application through
inspection, cross checking with the original documents
4. Divisional officer shall issue Registration Certificate in the form of Mushak – 8 within 2 days of
the application.
5. No fee is required for registration for the purpose of VAT.
6. No renewal or registration is required.
 22. What is self-registration?
1. The suppliers of Taxable goods or any renderer of Taxable services exempted from registration under
section – 16 can apply to the concern VAT officer for registration and the office will register the applicant
if he thinks fit by mentioning the register’s business identification number.
2. Notwithstanding anything contained in the VAT act, 1991
I. The seller of any goods which is produced, manufactured or imported in Bangladesh
II. The lessee or transferor
III. Any person rendering services mentioned in section 2 who is excluded u/s 15 and subsection-1
can apply for self-registration to the concerned officer and if he satisfied with the application ,
will register the applicant by mentioning his business identification number and such person
a. Will be register as tax payer and
b. Every concerned rules under this law will be applicable to determine and settle tax.
 23. Registration cancelled for the purposes of VAT?
The registration may be cancelled for the purposes of VAT if:-
a) The registered person discontinues businesses;
b) The registered person’s businesses are exempted for the purposes of VAT;
c) The turnover of the registered person is below tk. 80 lac;
d) The registered person fails to commence business after obtaining certificate of registration;
e) The turnover of the self-registered person is below tk. 80 lac.
The registered person shall apply to the VAT Circle Office in VAT Form- 10 for cancellation of the
registration.
 24. Transfer goods from central godown or from one center to another?
Centrally registered organization shall have to prepare three copies of special challan for transfer of goods
or material to and from central godown or from one sale center to another. First copy shall be sent where
the goods or materials are supplied which should be retained there. Second copy would be forwarded to
the circle in which the organization is centrally registered and third copy shall be retained at the address
where the organization is centrally registered. Copies of special challan must be retained for 6 years and
any lawfully authorized VAT officer shall have access to this for any examination. However, such special
challan can’t be used for transfer of goods to the buyer.
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 25. Offences and penalties.
Non-compliance covers a wider range of situations starting from registration to the collection and
payment of VAT as per the provisions mentioned in VAT Act, 1991. According to Section 37 of the VAT
Act, 1991, and Rule 4 & 35 of the VAT Rules, 1991, an assessed any be penalized for the following
offences:
As per section 37(1), if any person:
Sl. Offences Penalties
1. Fails to apply for registration, even if it would have been Fine of not less than Tk. 10,000
necessary to apply for registration under this Act and not less more than Tk.
20,000.
2. Fails to submit any return within the specified date Fine of not less than Tk. 10,000
and not more than Tk. 20,000.
3. Fails to inform the Value Added Tax Officer about any Fine of not less than Tk. 5,000
changes regarding registration and not more than Tk. 10,000.
4. Fails to comply with any warrant under section 25 Fine of not less than Tk. 10,000
5. Fails to maintain documents, electronic cash register or point Fine of not less than Tk. 20,000
of sales (POS) software or computer and not more than Tk. 50,000.
6. Violation of any other provisions of this Act Fine of not less than Tk. 10,000
As per section 37(2), if any person:
Sl. Offences Penalties
7. (a) Fails to submit tax invoice or submits an untrue tax invoice (a) if tax evasion takes place,
on important information, or then, he will be liable to
monetary penalty of minimum
(b) Fails to pay Value Added Tax or, where applicable, VAT half the amount or maximum of
and Supplementary Duty on goods supplied or service equal amount of the tax payable
rendered by him being directed twice by the concerned on the supply of concerned
Officer, or fails to submit the return for a tax period even after goods or services relating to the
lapse of the due time specified for such submission, or offence of tax evasion;
(c) Submits untrue return in the context of important (b) If the offence is of any other
information, or irregularities other than tax
(d) Attempts to evade VAT on supply of goods without evasion, then he will be liable to
recording information regarding sales in the sales register a monetary penalty of a
(Mushak-17) and in the Account Current register (Mushak-18), minimum of 20 thousand taka
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or and a maximum of 50 thousand
taka.
(e) Attempts to evade CAT by not entering information
regarding the purchase of inputs in the purchase register, or
(f) Evades or attempts to evade VAT or takes or attempts to
take duty drawback by submitting forged or false documents to
a VAT officer, or
(g) Despite being instructed by the concerned VAT officer, a
registered or worth of being registered person fails to furnish
any information or document, or
(h) Does not maintain any document or Electronic Cash
Register or Point of Sales (POS) Software or computer which
is required to be maintained under this Act or Rules; or
destroys or alters or mutilates such documents or demonstrates
it to be false of any account kept in computer through
Electronic Cash Register or POS Software or computer as per
the requirements of this Act, or
(i) Consciously makes a false statement or declaration; or
(j) Obstructs or prevents from entering into his business place
any VAT officer authorized under this Act to inspect or seize
any record, register or any other document. Electronic Cash
Register or computer relating to VAT, or
(k) Involve himself in receiving, taking possession or carrying
out transaction of such goods despite knowing fully well or
having sufficient reason to believe that VAT or as the case
may be VAT and Supplementary Duty payable on such goods
has been evaded, or
(l) Takes input tax credit through false or forged invoice, or
(m) Evades or attempts to evade VAT or Supplementary Duty
by any other means, or
(n) Issues Challanpatra stating therein the amount of VAT
even without being a registered person, or
(o) Does not do anything as required or does anything which is
not required under subsection (4A) of section 6, or
(p) Delivers goods or renders services under this Act or the
rule, without keeping sufficient balance required in the
Account Current Register by which adjustment or payment of
output tax can be made by accumulating the balance with
deposit money and the credit due on input tax, or
(q) Assists to do or does any activity described in clause (a) to
(p), then that activity shall be treated as an offence and shall be
penalized as maintained in opposite Column.
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 26. Mention the provision when submission carried on without VAT.
As per VAT Act 1991, if any business is carried on disrespecting the registration requirement than the
consequences are as follows:
 Registration can be made compulsory;
 Place of business can be sealed off;
 Goods produced can be forfeited;
 Penalty may be imposed (Minimum Tk 20,000 and maximum Tk. 50,000) sec. 37 (2)
 27. Name the importers who are exempted from registration requirement?
 All educational institutions and Government officers;
 Passengers carrying accompanied or unaccompanied goods from overseas through custom port,
custom airport and custom land station;
 All embassies, UN and UN bodies, Organization of Islamic Co-operation (OIC) and its bodies
and other privileged institutions.
Any educational or Government and other organizations mentioned above shall have to register for import
when they produce or manufacture goods.
 28. Cottage industry in our VAT law.

SRO no 168-Law/2003/376-Mushak has set four criteria for cottage industry. This are
 It must not be a Joint Stock Company;
 Capital investment therein on plant, machinery and equipment shall not exceed Tk. 40 lacs at any
time of the year;
 Turnover of the industry shall not exceed Tk. 60 lacs annually;
 29. VAT administration.

Like all other taxes, the apex body of VAT administration is the National Board of Revenue (NBR). It
appoints the following required VAT officers for a specified jurisdiction through official Gazette
Notification.
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VAT ADMINISTRATION
Administrative Authority Judicial Authority
1. NBR
2. Commissioner VAT
3. Commissioner large unit – VAT.
4. Director General-Audit & Inspection;

1. Appellate Tribunal
5. Director Duty Rebate;
2. Commissioner (Appeal), VAT
6. Additional Commissioner, VAT
7. Joint Commissioner, VAT
8. Deputy Commissioner, VAT
9. Assistant Commissioner, VAT
10. Superintendent, VAT
11. Inspector VAT
12. Other VAT officer with any designation, which include

inspections.
 30. Books and Documents Require to be Maintained for VAT Purposes:

The following books and documents shall be maintained by a VAT tax payer:-
a) Purchases register in Form VAT-16;
b) Sales Register in Form VAT-17;
c) Current Account in Form VAT-18;
d) Invoices in Form VAT-11 or 11A;
e) Paid Treasury Challan;
f) VAT Return in Form VAT-19; and
These books and documents shall be maintained for at least 4 years.
 31. Time Limit for Submission of Application for Drawback/Refund of VAT Rule 30(1).
A registered person who-
a) Export on commercial basis;
b) Manufactures or produces goods exempted from payment of tax;
c) Person who is exempted from registration.
Shall apply to Duty Exemption and Drawback Office (DEDO) within six months of the completion of
export for receiving drawback of taxes paid on inputs used in the manufacture or production of goods or
in the rendering of service. [SRO 637 of 2012]
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 32. Registration under VAT: Sec 15.
1. A supplier of taxable goods, provider of taxable services, importer, exporter of goods and service
shall be registered with the concerned VAT officer in accordance with the procedures prescribed
by Rule of this VAT Act.
2. If any person supplies taxable goods or render taxable services or carries on import-export
3. If the concerned VAT officer is satisfied that the application for registration is in order in all
respects, he shall register the applicant and issue a registration certificate mentioning therein his
Business Identification Number (BIN);
4. Notwithstanding anything contained in this section, validation of this certificate to be determined
by the rules and such registration certificate may be renewed in accordance with the Rules itself;
5. Upon inquiring by the concerned VAT officer, if any person is found that he is not registered, but
he is required to be registered under this Act, the VAT officer shall register the person with effect
from the date wherefrom it is obligatory to him;
6. Every registered person shall be provided unified registration number.
 33. Exemption from Registration; Sec 16
1) Government may, by general or special order exempt any person or class of persons from the
requirement of registration under section 1, on the basis of the annual turnover of taxable goods
or services as time to time determined by the Government.
2) The Board may, by general or special order, exempt any class of importers or exporters from the
requirement of registration.
 34. Time and mode of payment of VAT.
As per Section 6 & 23 of VAT Act 1991; the procedures and time for payment of VAT are enumerated
below:
1. Imported Goods: In case of imported goods the methods and payment of VAT and
supplementary duty as the case may be will be same as custom duty as per Custom Act.
2. Goods Produced by a registered person: In case of goods produced by a registered person,
VAT shall be payable on the happening of the following events which occur first:
a. When the goods are delivered
b. Issuance of invoice, relating to the goods supplied
c. At the time when goods are transferred for personal or the use of others
d. Receipt of full or part payment
3. Service Rendered by the registered person: In case of service rendered by the registered
person, VAT shall be payable on the happening of the following events, which occurs first:
a. When service rendered
b. Issuance of invoice
c. Receipt of full or part payment
4. Direction of time and method by Board: Notwithstanding anything contained above, the board
may, in accordance with the prescribed rules direct any method and time for payment and system
of VAT, supplementary duty including advance payment in respect of any goods, class of goods
and services.
5. Attachment of any stamp or banderole: Notwithstanding anything contained in this act,
Payable by Value Added Tax for services which is ascertained by govt. notification in the gazette
for this purpose will deduct or collect at source according to prescribed manner by order of the
board, at the time of payment of service value or commission by concerned service received or
commission payer.
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 35. Description of deduction of VAT at source.
4a. Deduction at source: Notwithstanding anything contained in this act, Payable by Value Added Tax
for services which is ascertained by govt. notification in the gazette for this purpose will deduct or collect
at source according to prescribed manner by order of the board at the time of payment of service value or
commission by concerned service received or commission payer.
4b. Subject to the provision of sub section 4 (aa), a certificate in this regard shall be given by the payer to
the payee mentioning the following:
i. The registration number of the VAT payer;
ii. Total amount of payment for service;
iii. The amount of VAT deducted;
iv. Any other information warranted by rules
4c. Penalty: If the person concern fails to deduct VAT;
i. He shall pay interest @2% per month with the original amount due as VAT
ii. The amount deducted and paid shall be deemed to be paid by the party from which deduction has
been made
iii. Notwithstanding in clause (a) if VAT is not deposited within two months from the date of its
collection/deduction the person responsible shall be penalized by not exceeding tk. 25,000 by the
commissioner.
 36. Who will need to pay VAT?
Value added tax will be paid by:
1. The importer in case of imported goods,
2. The supplier of goods manufactured or produced in Bangladesh
3. The provider/renderer of services
4. In other cases, the suppliers and services receivers
 37. Determination of Value for imposition of VAT.
The value for the purpose of Value added tax payable, the value shall be the transaction value as
determined under section 25 or section 25A plus import duty and supplementary duty including other
duties and taxes if any excepting
Import stage: Customs Assessable Value + Customs duty + Supplementary Duty with other duties and
taxes (if any), except advance income tax.
Other duties and taxes means Safeguard Duty (SGD), Countervailing Duty (CVD), Antidumping Duty
(ADD) etc.
Calculation of VAT at import stage:
Based on: Value+CD+RD+SD
If assessable value for customs duty (CD) is Tk.100

If – Then amount of VAT is = Tk. (100+25+5+26) X
 rate of CD is 25% on AV rate of VAT 15% or Tk. 156 X 15% = Tk. 23.40
 rate of RD is 5%
[i.e., Base of VAT = Tk.150.00]
 rate of SD is 20% on (AV+CD+RD)
 rate of VAT is 15% on (AV+CD+RD+SD)
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Local stage: Value of goods is determined by aggregating the cost of inputs, other costs & charges, profit
and commissions.
Goods (manufacturing): [{Value of inputs + Total expenses + Commission, charge, fee (if any) + all
duties and taxes (if any), excepting VAT + Profit} + Supplementary Duty (if any)].
Calculation of Taxes:
Value of inputs = Tk. 156.00

Total expenses = +30.00
Commission = +4.00
Profit = +20.00
Total = 210.00
SD @ 20% +42.00
Value for VAT = 210.00+42.00 = 252.00
So the amount of VAT = Tk. (252 X 15%) = Tk. 37.80
[Assessable value for SD: The amount or consideration received or receivable from the buyer excluding
the amount of SD and VAT]
Value for Services: Total receipts excluding VAT, but including SD (if any).
Total receipt means – Total money received or receivable including commission or charge, excepting
VAT by the taxable service renderer in exchange of his services. {sec. 2 (bha)].
Advanced Trade VAT (ATV): [{(Customs assessable value + Customs Duty) + Regulatory Duty (if
any) + SD (if any) + 26.67% (value addition0] X 4%.
 Value to be declared under section 5(2) with the “form-1Kha” (rule 3) to the divisional Officer of
VAT for the next supply and taxes to be paid @ 15%.
 Value declaration with input – output co-efficient in form “Musahak-1” to the Divisional Officer
of VAT.
 38. Mention 10% sources of VDS.
The followings are the 10% sources of VAT deducted at source:
I. Motor car garage and workshop
II. Dockyard
III. Transport contractor other than transportation of petroleum product
 39. Information relating to price Declaration:
1. Description of goods
2. Value of inputs and where applicable duties and taxes (other than VAT) paid on the inputs
3. All direct and indirect expenses of the organization (other than income tax).
4. Commission, charge fee paid.
5. Profit
6. Item wise value addition
7. Sale price including duties and taxes.
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 40. Provision relating to Trade Discount: U/r-3(6)
a) The registered person shall have to inform the concerned divisional officer
b) The price of the goods before and after discount
c) Publishing the information in the national daily
d) Discount amount shall not exceed 15% of the actual price
e) Allowed for 30 days in any twelve months periods.
 41. Persons Responsible for Deduction of VAT
The following organization and establishment herein after referred to as VAT deduction at source
authority shall be responsible for deduction of VAT source:
f. Semi-Autonomous Bodies
a. Government g. NGO’s
b. Autonomous Bodies h. Insurance Companies and
c. Banks i. Non-banking Financial Institution
d. Limited Companies
e. Educational Institution
 42. Special treatment of Specified “Input Tax”

The Tax payer can claim 80% of the VAT paid as claim against input tax in respect of charges for
telephone, tele-printer, fax, internet, freight forwarders, clearing & forwarding agents, WASA, insurance,
audit and accounting firms, suppliers, security services, carrying agents, letter of credit services,
electricity and other related taxable services.
 43. Penalty for False Declaration of Input Tax
If a tax payer makes false declaration relating to credit of input tax, he may be penalized under section 37
of the VAT Act, 1991 to the extent of minimum half of tax payable or maximum full of tax payable
amount; and also the credit of the input tax shall be cancelled.
 44. What is meant by input? Input tax?
Under VAT Act 1991, Input means:
 All kinds of raw material, packaging materials, services, machinery and spare parts thereof except
labor, land, building, office equipment and transport;
 All goods imported, purchased, acquired or otherwise procured in any way for the purpose of
sale, exchange or transfer in connection with business.
“Input Tax” means the Value Added Tax paid on inputs imported by a registered person, or purchased by
him from any other registered person and also includes advance payment of VAT at import stage.
 45. How input tax can be taken?
The registered person is to pay VAT on input at the time of acquisition and is to realize VAT from the
customers against output/sales. In this case he has the right to deduct input VAT from output VAT and is
required to pay excess amount of output VAT over input. This deduction procedure is called rebate of
input VAT.
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 46. Consideration to be fulfilled for rebate.
To take rebate under this section the following conditions are to be fulfilled:
1. The person must be registered under VAT Act.
2. The rebate is to be taken against output tax.
3. Valid papers are to be submitted for input tax.
4. Valid papers and the input must be in the possession of rebate taker. The name, address and
registration number must be mentioned in the input tax related papers.
5. Rebate is to be taken within the tax period.
6. In the price declaration the analysis of the cost of input must be shown.
 47. Which tax payer cannot obtain rebate?
According to section 9, input VAT credit cannot be taken for VAT paid on inputs used in the production
of exempted goods or services. Earlier it was only applicable for exempted goods producers.
 48. Whether rebate on VAT, ID, SD and AIT can be obtained?

Import duty, supplementary duty and AIT cannot be obtained as rebate but VAT can be. However, draw
back on import duty and supplementary duty can be obtained against output tax through adjustment in the
current account subject to the provisions of VAT Rule 19(4).
 49. Benefit of input tax rebate.
The benefits of input tax rebate are as follows:
a) Rebate system removes the cascading effect of tax on tax as was the situation under earlier sales
tax regime. Theoretically it is the ultimate consumers bearing the incidence of VAT and at each
stage before that, the producers or sellers can adjust the input tax against output tax and thereby
transfer the incidence of tax to next stage or person until the goods or services are finally bought
for consumption;
b) Without the provision for input tax rebate, tax paid thereon would form part of cost of goods or
services and in that case the producers or service providers cannot compete locally and
internationally;
c) Rebate process ensures a kind of indirect check and balance between input outp0ut co-efficient
and can be a protective drive to check tax evasion.
 50. Restrictions relevant to individuals enlisted for turnover tax payment.
a) People enlisted for turnover tax cannot pay tax on the base of tariff or reduced value;
b) Those people cannot achieve input rebate and VAT registered people purchasing from turnover
taxed people on the base of tax challan cannot also achieve input rebate.
 51. Books and Records to be maintained by the Turnover Tax Payer.
1. Daily purchase and sales registered in the form of Mushak – 17A
2. Cash memo in serial order in self-designed
3. Paid Treasury Challan
4. Turnover Tax Return in the form Mushak – 4
5. VAT declaration of Turnover in the form Mushak – 2B
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 52. Whether turnover tax (TOT) can be deducted at source?
Turnover Tax (TOT) cannot be deducted at source against supply of goods or service. However, it is to be
ensured through presentation of treasury challan and certificate about deposit of due tax in advance for the
related tax period.
 53. Tax period of people enlisted for TOT?
Tax period can be yearly, quarterly or monthly. It entirely depends on the convenience of the turnover tax
enlisted individual being to choose his tax period and mention the same while declaring yearly turnover in
form ‘VAT’ – 2B on the basis of his own selection, enlisted individual shall have to submit return to the
concerned circle.
 54. In what process turnover tax of a definite tax period is to be paid?
In case of yearly declaration, within 30 days of declaration of turnover and for quarterly or monthly
declaration within 15 days of such declaration tax calculated @ 3% together with the main copy of
treasury challan have to be submitted to the related circle in form ‘VAT’- 4. Tax is payable from the date
of enlistment.
 55. What is Turnover Tax (TOT)?
Turnover Tax (TOT) is a tax as an alternative to “full VAT” on the turnover of a manufacturer or
producer of taxable goods or provider of taxable services as case may be, who is not ought to register for
the purpose of VAT under section 15 of the VAT Act 1991.
Turnover Tax has been included in the VAT Act, 1991 to allow small traders, business man, manufacturer
to pay tax @ 3% on turnover, provided it does not exceed annual turnover tk. 80 lac.
 56. Penalty of nonpayment of Turnover Tax (TOT)?
In case of failure of payment of turnover tax, VAT superintendent can impose fine up to Tk. 5,000 and
additional tax @ 2% per month for the delay of non-payment period.
 57. Penalty for false declaration of Turnover Tax.
If the turnover tax payer makes false declaration for turnover tax by understating his turnover, he may be
penalized under section 37 of the VAT Act 1991 to the extent of at least the tax evaded and at best 1.5
times of tax evaded and also required to pay unpaid tax (Difference between CAT and turnover tax).
 58. Difference between VAT & Turnover Tax.
SL. Particulars VAT (Value Added Tax) TOT (Turnover Tax)
1. Tax Rate Tax Payer pays VAT @15% of the Tax payer pays Turnover Tax @3%
value added, which may be ‘full’ of the ‘full’ invoice value.
invoice value or a part there of as the
case may be.
2. Credit of Input Tax Payer can take credit of input tax Tax Payer cannot take credit of
Tax paid by him. input tax paid by him.
3. Credit of VAT The purchaser can take credit of the The purchaser cannot take credit of
paid by purchaser VAT paid by him. the VAT paid by him.
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4. Tax payment The Tax payer pays before each The taxpayer pays monthly,
delivery of goods or rendering of quarterly or annually as the case
services. may be.
5. Books and The tax payer maintains purchase The tax payer maintains Daily
Documents register, sales, register, current purchase and sales Register.
Account and Invoices.
6. Return Taxpayer submits Return in the form The tax payer submit return in the
VAT – 19 monthly within 15 days of form VAT – 4 monthly or quarterly
the end of the month. within 15 days of the end of the
month/quarter, as the case may be.
7. Deduction at VAT can be deducted at sources. TOT cannot be deducted at sources.

source
 59. Supplementary Duty?

Supplementary duty is an output tax. In addition to VAT, supplementary duty is imposed on luxuries, not
essential and not socially desirable goods and services. The rate of supplementary duty varies from 10%
to 500% such as: 10%, 20%, 30%, 45, 48%, 60%, 61%, 63%, 100%, 150%, 200%, 250%, 350%, 500%;
and at a rate ranging from 5% to 35% for services such as: 5%, 10%, 25% and 35%.
Supplementary duty generally imposed on followings:
1) Luxury, non-essential and socially undesirable goods and services on which imposition of
supplementary duty is justified in the public interest, as specified in the Third Schedule
2) For the purpose of imposition of supplementary duty, the value of the goods or services shall be –
a. In case of imported goods, the values as determined under section 25 or 25A of the
Customs Act for the purpose of imposition of import duty;
b. In case of goods manufactured in Bangladesh and in case of other taxable goods, the
consideration charged to the buyer in which VAT or supplementary duty is not included;
c. In case of service provided in Bangladesh, the total receipts on account of service
excluding VAT and supplementary duty;
d. In case of goods on which VAT is charged on the basis of the retail price, shall be
considered as the value of the goods for the purpose of imposition of supplementary duty.
3) Time and mode of payment of supplementary duty shall be the same as applicable to VAT.
 60. What is truncated value?

Truncated or short value system is one where VAT at standard rate (15%) is charged on the truncated
value or deemed or estimated value addition. This price is not the actual nor do the market prices of the
services not even the accurate amount of value addition. This may be nearer to the amount of value
addition and used for the purpose of VAT assessment. Since this is based on a fraction of the value, input
tax rebate cannot be obtained excepting on exports or deemed exports.
Sometimes, it becomes very difficult to avail VAT credit/adjustment facilities due to non availability of
invoices supporting the purchase of input. In order to remove this operational difficulty fixed bases such
24
as 15%, 25%, 30% and 60% value addition is taken into account for calculation of VAT for a number of
goods and services. Thus, truncated value is the percentage of value addition on which VAT is applicable.
Followings are some examples where truncated systems are applied.
SL# Taxable Services Value Addition VAT
1. Motor Vehicle garage and workshop 30% of total receipts 4.5%
2. Construction Contractors 30% of total receipts 4.5%
3. Building Developers 10% of total receipts 1.5%
4. Consultancy and supervisory firm 30% of total receipts 4.5%
5. Securities Service 30% of total receipts 4.5%
 61. VAT assessments/duties and responsibilities of VAT assesse.

Duties & responsibilities of VAT Assesse: A VAT assesse needs to pay tax, maintains account and
document properly. To this end his duties and responsibilities are as follows:
i. To ascertain tax liabilities through Current Account at the time of supply of goods and deposit
relevant tax to the exchequer.
ii. To fill up and make entry in current account, purchase and sale account and transfer the relevant
item in concerned books and documents periodically.
iii. To deposit relevant books and accounts to tax authority in due time.
iv. To keep in safe custody all accounts and books relevant to VAT at least for six years.
v. To produce relevant books and accounts to tax authority on demand.
vi. To allow tax officials to enter into his business premise.
vii. To maintain in voice to ensure refund and rebate of tax.
viii. To supply invoice to purchaser at the time of supply of goods.
ix. To collect & deposit taxes as per provision of VAT act.
 62. Discuss some important features of VAT in Bangladesh.

The main features of VAT in Bangladesh are as follows:
i. VAT is imposed on goods and services at import stage, manufacturing, wholesale and retails
levels;
ii. A single stage VAT is applicable for both imports cum manufacturing.
iii. A uniform rate is 15 percent is applicable for both goods & services.
iv. VAT is compulsory for whole sales/retailers (for selected items)
v. VAT is applicable for goods and services as mentioned the VAT Act.
vi. Exports are zero rated subject to fulfillment of some conditions.
vii. VAT is payable at the time of supply of goods and services.
viii. Turnover tax @ 4% is leviable where turnover amount is less than Tk. 80 lac.
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ix. Some industries like Agro-based, Cottage industries are exempted from VAT.
x. Taxes paid on inputs are creditable against output tax as per provision of Section-9.
xi. Tax returns are to be submitted on monthly or quarterly or half yearly basis as notified by the
Government.
 63. What are the different types of value added tax?
According to the provision of Value added Tax Act 1991 three different types of tax are charged which
are as follows:
i. Value Added Tax: Importers, manufactures and service providers, having minimum annual
turnover of Tk. 60 lac have to pay 15% tax on their value addition under Section 3 of the VAT.
ii. Turnover Tax: Turnover tax @4% is leviable on those persons and organizations whose
turnover amount is less than Tk. 80 lac under Section 8.
iii. Supplementary Duty: Luxurious, non-essential and socially undesirable goods are subject to
supplementary duties at different rates ranging from 20% to 500% under Section 7 of the VAT
Act.
 64. What do you mean by presumptive/Fixed VAT?
Presumptive/Fixed VAT: Small traders and retailers are required to be registered and to pay flat rate of
VAT, which is known as presumptive/Fixed VAT. The actual rate depends upon the location, Taxpayer
residing in Dhaka North, Dhaka South & Chittagong City Corporation area are required to pay an annual
VAT of Tk. 28,000 while in other City Corporation areas pay Tk. 20,000. The corresponding rate for
taxpayer residing in municipal area of district town and other areas Tk. 14,000 and Tk. 7,000 respectively.
 65. Areas of registration is required for the purpose of VAT.
A person needs to register for the purpose of VAT before commencement of the following business
activities:
a) Production or manufacture of goods;
b) Trading of goods;
c) Rendering of services;
d) Import of goods;
e) Export of goods
 66. Applicable rate of VAT deduction or collection at source for the following cases:
i. Construction contractors.
ii. Indenting commission.
iii. Banking service.
iv. Audit fees.
v. Sale of goods on auction.
VAT is deductible at source from various services at rates as under
i. Construction contractors @ 5.5%
ii. Indenting commission @ 15%
iii. Banking services @ 15%
iv. Sale of goods on auction @ 4%
v. Audit & accounting firm @ 15%
26
 67. Documents need to be submitted for VAT registration &Time of registration cancelled.
Application for VAT registration shall be made to the VAT divisional office in form VAT – 6. The
following documents shall be submitted along with the application form:
a) Trade license;
b) TIN Certificate (if any);
c) IRC/ERC Certificate (if any);
d) List of all related selling centers in the case of central registration; and
e) Declaration in form VAT – 7 of the production or business premises, plant, machinery, fittings,
finished or tradable goods, stocks, and imports.
If the application is completed, the VAT divisional officer shall issue the certificate of registration in the
form VAT – 8 within 7 days of the application.
No fee is payable for registration for the purposes of VAT.
If a person carries out business from various premises, he may obtain “central registration” so as to pay
VAT; and complies with the requirement for the VAT laws “centrally”. However, no “group” (that is,
various companies/entities under common management for ownership) registration is permissible under
the VAT Act, 1991.
If “central registration” is not obtained, then separate registration for separate premises shall be required
for the purpose of VAT. However, if a registered person changes his premises or businesses, he will file
declaration with the VAT Circle Office in form VAT – 9 at least 14 days prior to such changes in his
premises or businesses.
Registration may be cancelled for the purposes of VAT if:
a) The registered person discontinues businesses;
b) The registered person’s business are exempted for the purposes of VAT;
c) The turnover of the registered person is below Tk. 80 lac;
d) The registered person fails to commence business after obtaining certificate of registration;
e) The turnover of the self-registered is below Tk. 80 lac;
The registered person shall apply to the VAT Circle Office in VAT form 10 for cancellation of the
registration.
 68. Under what situations, Input Tax Credit is not allowed VAT Act, 1991?
As per section 9 (1) of VAT Act 1991, the supplier and traders of taxable goods or services shall get
credit of input tax against payable of output tax except in the following cases:
a) VAT paid on input to produce exempted goods
b) Turnover tax paid on inputs procured from turnover tax payer
c) Supplementary duty paid on input
d) Value added tax paid on package reusable at any other time except for the first time
e) VAT paid for BMRE or repair purposes of building, in structure, establishment, furniture,
stationeries, A.C fan light and payments for architecture, designing and other products related
with such products or services.
f) Various goods and services specified by rules and value added tax in excess of the rate of
value added tax paid on such goods and service.
27
g) VAT paid on travel, entertainment, employee welfare etc.
h) In the case of –
i. Value added tax paid against inputs not included in taxable value base of
goods mentioned in of section 5(2).
ii. If value addition exceeds 7.5% without correction of declared price.
iii. Input tax paid on inputs purchased by traders mentioned in the second
provision of section 5(2).
i) VAT paid by service provider on input u/s 5(4).
j) Input tax paid on input purchased by traders mention in Section 5 (4a).
k) VAT on the input u/s 5(7) on tariff value.
l) VAT paid on bill of entry having registrations numbered other than person concerned.
m) VAT paid on goods under custody, or procession or occupancy of any other person.
n) VAT paid on materials which were not recorded in purchased book
o) VAT paid on materials for which bank guarantee was given.
p) VAT on purchase value, if payment (part or full) was not made by banking channel for
purchase exceeding taka 1 lac.
Rule – 19
(1A) Notwithstanding anything contained in the sub-rule (1), credit may be taken for the following
payments in respect of production or supply of goods surrendering of taxable service, namely:-
i) Eighty percent of the value added tax paid on the use of insurance in supply of gas and electricity;
telephone, teleprompter, fax, internet, freight forwarders, clearing and forwarding agent, WASA, audit
and accountant firm surveyor, security service, legal advisor, transport contractor and banking service.
Provided that the tax payer shall have to take credit on input tax within thirty days following the date on
which all inputs mentioned in the invoice or bill of entry enter the tax payer’s premises of production,
supply or service.
 69. Duties and responsibilities of VAT assesse?
The duties and responsibilities of VAT assesse mentioned below:
a) To ascertain tax liability through current account at the time of supply of goods and deposit
relevant tax to the exchequer.
b) To fill up and make entry in current account, purchase and sale account and transfer the relevant
items in concerned books and documents periodically.
c) To submit relevant books and accounts to tax authority in due time.
d) To keep in safe custody all accounts and books relevant to VAT at least for six years.
e) To produce relevant books and accounts to tax authority on demand.
f) To allow tax officials to enter into his business premise.
g) To maintain invoice to ensure refund and rebate of tax
h) To supply invoice to purchaser at the time of supply of goods.
i) To collect and deposit taxes as per provision of VAT Act.
28
Additional
Q# 1. Value addition is the important principle of VAT. Please explain the idea in context of VAT Act,
1991?
Answer:
Principle of Value Addition: Value Added Tax (VAT) means tax on value addition. The difference
between the input value and output value of any product and service at each stage of economic transaction
is known as value addition. VAT is charged on the value added at each stage of transactions of goods or
services from primary production to final consumption. So, every one, except final consumer, does not
have to bear any VAT from his own account. Because whatever the person other than the final consumer
has paid as VAT at the time of purchase he will collect that amount of VAT from persons who will buy
his goods or services and also collect tax on value which is added by him before selling. The standard rate
of VAT is 15%. The distinctive feature of VAT is that unlike erstwhile sale tax, it does not have any
cascading or tax on tax effect. Under sales tax regime there was no scope to adjust sales tax paid as input
tax against output tax payable and it used to be compounded at each intermediate stage. By introduction
of value addition concept the tax base has been expanded significantly with the expansion of
manufacturing and service sector in the economy.
Q# 2. Sunshine Ltd. submitted a price declaration to the VAT authority on 1 July 2016 showing the price
for levy of VAT at Tk. 50 per unit of VATable goods. On 20 July, 2016 the VAT authority approved the
price per unit at Tk. 80 rejecting the price declared by the company without giving any opportunity of
hearing to the company. As the Chief Accountant of the company, you are asked by the company
management to take necessary steps to protest the actions of the VAT authority. What are the legal steps
you would take and explain the grounds in support of your action plan?
Answer: Necessary legal steps to protest the ‘arbitrary’ actions of VAT authority:
i. As per Rule 3 of VAT Rules 1991 approval to the price declared by a registered person is due
within 15 working days. Sunshine Ltd. has declared the price on 01 July 2016 and considering 4
weekly holidays the approval is due by 19th July 2016 but the authority has accorded the same on
20 July 2016. Therefore, the price declared by Sunshine Ltd is “deemed to have been approved”.
Further, the authority has enhanced the price from Tk. 50 to Tk. 80 without allowing hearing
which is also unlawful.
ii. Also, an application should be preferred before the Commissioner of VAT within 30 (thirty)
working days of receipt of such “arbitrary” & “time barred” Price approval.
iii. The VAT Commissioner will have to dispose of such application, giving an opportunity of being
heard, within 15 (fifteen) days of such application.
Otherwise, it shall be deemed to have been disposed of favoring the Assesse.
29
Q# 3. Under which circumstances may a company cancel its VAT registration? What will they do to
cancel the VAT registration?
Answer: In pursuance with rule 15 of VAT Rules 1991, a Company, being registered person, can cancel
registration under the following circumstance:-
a) Being abstained from manufacture or production or sale of taxable goods or rendering of taxable
service, or import or export of any goods;
b) Taxable goods or services are declared as exempted goods or services;
c) Failing to start the business of production or manufacturing or supply of taxable goods or
rendering of services following being registered;
d) The turnover becomes less than Tk. 80 lac in the next one year from the date of registration of a
voluntarily registered person as per section 17 of the Act;
e) If the annual turnover of the registered person is less than Tk. 80 lac;
The Company shall apply to the VAT Circle Office in VAT Form-10 for cancellation of the registration.
Q# 4. X Ltd., pays Tk. 60,000 per month as office rent and Tk. 10,000 per month as other charges (lift
and security charges) to the landlord. The landlord wants that X Ltd. should pay 12% VAT along with the
above rent and charges to him, which will then be deposited by the landlord to the government treasury?
On the other hand X Ltd., wants to deduct 9% VAT from rent and 2.25% VAT from other charges, make
the payment (net of VAT) to the landlord and deposit such deducted amounts to the government treasury.
Both of them have now come for your advice.
Advise on the basis of the current provisions of VAT Act and its Rules.
Answer: There is no provision of VAT deduction at source on house rent. VAT on house rent is paid by
the tenant. X Ltd., as tenant, has made an agreement with the landlord regarding the terms and conditions
of rent. He pays the rent to the landlord; and he is also required to pay 9% VAT from his own fund on the
agreement amount to the government treasury, the tenant requires to submit the treasury Challan to the
local VAT Circle Office. While calculating VAT, charges for lift and security cannot be excluded. In our
VAT system of Bangladesh, the base for calculation of VAT is total receipt. Total receipt includes the
price of the service, all charges, fees, commissions etc. involved thereon. Total receipt remains defined
under section 2 of the VAT Act, 1991. In this case, total receipt Tk. 70,000. This amount is to be paid to
the landlord. On top of this amount, 9% VAT stands at TK. 6,300 needs to be deposited to the
government treasury as VAT on house rent. Here, VAT is being paid by the service receiver. This is not
VAT deduction at source.
Q# 5. In early June 2015 XY Ltd., offered to provide some engineering consultancy services to AB Ltd.,
at Tk. 850,000 which is the lowest bid price. Another bidder quoted Tk. 1,000,000. XY Ltd., has not
attained VAT registration. AB Ltd., intends to hire the services of XY Ltd., being cheaper. PQ Ltd., a
security service provider appointed by AB Ltd., i.e. 1 June 2015, is registered with VAT authority. PQ
Ltd., is unwilling to issue a valid VAT invoice (Mushak-11) and has asked the Company to deduct VAT
at source from the amount payable thereto. In this situation, AB Ltd., is not sure whether deduction of
VAT at source would be sufficient compliance with the provisions of VAT laws.
Requirement:
Advise AB Ltd., with consequences, if any, for entering into the above transactions.
30
Answer:
As per Section 19(Ka) of the Value Added Tax (VAT) Act, 1991, no person would be able to take part in
any tender if he is not registered with the VAT Authority or any work order cannot be issued in favor of
him. Moreover, as per Section 9(1) (T) of the Value Added Tax (VAT) Act, 1991 input Tax credit shall
not be allowed on any purchase if anybody makes the purchase from any person not registered with the
VAT authority.
In the given situation, XY Ltd., the lowest bidder to provide the engineering consultancy services to AB
Ltd., is not registered with the VAT authority. As per Section 37 (1) (6) of the VAT Act, 1991, the person
awarding the tender or work order may be penalized with a minimum of Tk. 10,000 and a maximum of
Tk. 30,000. Therefore, it is advisable to hire the consultancy services from an entity registered with VAT
authority instead of XY Ltd., to avoid the negative consequences as mentioned above. AB Ltd., should
include a provision of mandatory submission of a copy of the VAT Registration Certificate by intended
local suppliers in its vendor enlistment policy and ensure availability of valid Mushak-11 before receiving
commercial invoice from suppliers.
However, AB limited will not be eligible for input VAT credit on the engineering consultancy services
irrespective of availability of Mushak-11 from another bidder since as per Section 9 (1) (D) of the VAT
Act 1991, input VAT credit facility is not allowed on any service related with infrastructure. In the
absence of details it is assumed that the engineering service will be taken for infrastructural development.
However, in the event AB Limited enters into the transaction with XY Limited, the invoice of XY
Limited should be considered as inclusive of VAT as per Rule 23 (4) of the VAT Rules 1991. AB
Limited has the responsibility of determining the applicable withholding VAT by back calculation (i.e.
multiplying invoice amount by 15/115). In this case, the VAT amount becomes Tk. 110,870 (Tk.
850,000X15/115). AB Limited will be required to deduct the applicable VAT at source before making
payment and deposit the same to the Government exchequer within 15 working days of deduction.
The same process will apply if AB Limited hires the service from the other bidder and the bidder does not
mention VAT amount separately in the issued Mushak-11. However, since XY Limited is unregistered, it
appears that they did not consider VAT from its fee. In such case, AB Limited would be required to bear
the applicable VAT (i.e. Tk. 110,870) from its own exchequer.
As per SRO# General Order no.-03/Mushak/2014 dated 05 June 2014 issued by the National Board of
Revenue (NBR), a company has responsibility of mandatory deduction of VAT at source at the rate of
15% from a 'Security service provider' (service code SO 40) irrespective of the availability of Mushak-11
in exchequer using the relevant Commissioner Code within 15 working days of deduction. As per Rule 19
(1'K') of the VAT Rules 1991, 80% input VAT credit is allowed on security service. However, as per
Section 9(1) (U) of the Value Added Tax (VAT) Act, 1991 input VAT credit shall not be allowed on any
purchase without availability of valid VAT invoice (i.e. Mushak-11). Therefore, merely the deduction of
applicable amounts of VAT would not be sufficient to avoid the negative consequence of loss of input
VAT credit.
In the given situation, PQ Ltd., as appointed by AB Ltd., to provide security service, is unwilling to issue
the valid VAT invoice (i.e. Mushak-11). AB Ltd., is required to deduct applicable amount of VAT at
source and should deposit the same to the Government exchequer within due time. However, in the
absence of valid VAT invoice, AB Ltd., cannot take input VAT credit. Therefore, I would advise AB
Ltd., to discuss with PQ Ltd., to provide the valid VAT invoice.
31
Q# 6. AB Ltd., is now negotiating a deal with ST Ltd., for purchasing television sets. AB Ltd., intends
that ST Ltd., delivers the television sets to CD Ltd., a dealer of AB Ltd., wants that ST Ltd., issues
"Mushak-11" challan in favor of ST Ltd., so that they would be able to get input tax credit on the
purchase.
Requirement: Advice AB Ltd., on the above.
Answer:
Assumption:
In the given situation, AB Ltd., wants that ST Ltd., issues Mushak-11 Challan in favor of ST Ltd. As per
the current provision of the VAT law, a person cannot issue Mushak-11 Challan in favor of himself.
Therefore, it is assumed that the question intends to mean to issue Mushak-11 Challan in favor of AB Ltd
instead of ST Ltd., so that it can get input VAT credit.
As per Section 32 of the VAT Act 1991 read with Rule 16 of the VAT Rules 1991, any VAT registered
person has to issue Challan in form "Mushak-11" for supply of every goods and such Mushak-11 challan
has to be accompanied with the goods up to its final destination mentioned on it. Moreover, the
purchaser's and seller's name, address, registration number and destination of goods etc. have to be clearly
mentioned on the Mushak-11 Challan. As per Section 38 (2) (L) of the Value Added Tax (VAT) Act,
1991, the VATable goods shall be confiscated if such goods are removed from the business premises with
Mushak-11 Challan which does not accompany with the goods up to its destination. Moreover, as per
Section 9(1) (U) of the Value Added Tax (VAT) Act, 1991, the products purchased are required to be
brought into the premises of the registered entity in full to avail input VAT credit.
Therefore, for the given situation in the question, it is advisable to AB Ltd., to bring the televisions into
its own premises first from ST Ltd., for avoiding the risk of confiscation by the VAT authority and
availing input VAT credit. AB limited can then supply the purchased televisions to the CD Ltd. Provided
that the name, address and VAT registration number etc. of AB Ltd., and ST Ltd., have to be clearly
mentioned on the Mushak-11 Challan.
However, this suggestion may be impracticable to follow if the business premise of CD limited and ST is
adjacent or nearer and that of AB limited is far away from ST limited. In that case, once getting the
products from ST limited and then sending them back to CD may not be cost effective. AB limited in that
case may open a small branch near to CD limited with a separate VAT registration, receive the goods
from ST limited and immediately forward the same to CD limited. The branch will perform the necessary
documentation work to get input VAT credit, deposit VAT Current Account and then sell the televisions
to its dealer/customer.
32
Examples of VAT Math
1. Sun Moon Company
Math #1
Sun Moon Company has imported a consignment of 10,000 Tined Cookies from Malaysia on 15th July
2015. The C&F value and customs added value of the cookies are BDT 2 million and BDT 2.2 million
respectively. Mr. Karim the MD of the company requested you to ascertain the landed cost of
consignment on consideration of port charges, transport charges and miscellaneous expense equivalent
to 25% of C&F value. Under relevant HS code the rate of Customs Duty, Regulatory Duty and
Supplementary Duty are 25%, 10% and 15% respectively. You are also to ascertain AIT, ATV, VAT
and PSI charges and to appraise the MD on their inclusion and exclusion to landed cost.
Solution #1
Particulars BDT
Custom's Assessed value (AV) 2,200,000
Add: Custom's Duty (CD) (22,00,000 X 25%) 550,000
Regulatory Duty (RD) (22,00,000 X 10%) 220,000
SD leviable value 2,970,000
Add: Supplementary Duty (SD) (29,70,000 X 15%) 445,500
VAT leviable value 3,415,500
VAT @ 15% on 34,15,500 512,325
AIT @ 5% on AV that is 22,00,000 110,000
ATV @ 4% on (AV+CD+RD+SD)*1.2667 173,057
[ATV for Commercial Investor/importer 4% and value addition 26.67%]
PSI :1% of assessable value: @ 1% on 2,200,000 = 22,000

Landed cost: CNF value+All non refundable duties+PSI+Other expenses
=2,000,000+550,000+220,000+445,000+22,000+(2,000,000*25%)
= 3,737,000
Assuming Sun Moon Company follows price declaration basis, and pay vat on value addition at the time
of selling goods to their customer @ 15%.
33
2. Rahman Industries Limited
Math #2
Rahman Industries Limited a vehicle assembly plant, has imported CKD parts and components for trucks
amounting to Tk. 25,00,000 in the month of July 2016. Rahman Industries Ltd. 'has assembled and manufactured 4
trucks from the above imported parts and components and then sold those 4 trucks to the dealer M/S Karim & Co.
@ Tk. 10,00,000 each. M/S Karim & Co then sold 3 trucks to M/S Chowdhury Transport & Co. @ 11,00,000
each.
Calculate VAT @ 15% payable at import stage & each stage of sales.
Solution #2
Price VAT @ 15%
Stage of sale Remarks
excluding Input Output
Rahman Industries Ltd. 2,500,000 375,000 600,000 VAT Payable 225,000
M/S Karim & Co. 4,000,000 600,000 495,000 Adjustable 105,000
M/S Chowdhury Transport & Co 3,300,000 - - Ultimate Consumer
Add: VAT 495,000
3,795,000
Alternative:
Net VAT
Amount of Output Input Output
No of Input Price payable
Stage of Business Value Price VAT VAT
Sale (Taka) (Treasury
Addition (Taka) (Taka) (Taka)
Deposit)
Rahman Industries Ltd.
(Manufacturer) 4 2,500,000 1,500,000 4,000,000 375,000 600,000 225,000
M/S Karim & Co. (Dealer) 3 3,000,000 300,000 3,300,000 450,000 495,000 45,000
M/S Chowdhury Transport &
Co. (Consumer) 3,300,000 - - 495,000 - 495,000
3. A manufacturer
Math #3
A manufacturer sold goods worth Tk. 10 lac to the wholesaler by including to it VAT @ 15%. The wholesaler added 10% as
markup and sold the goods to the retailer by adding VAT who in turn sold the goods to the consumer by adding markup @
15%.
Compute VAT at each stage and indicate the total VAT paid by the consumer.
Solution # 3
Stage of Element of Input Price Amount of Output Price Input VAT Output VAT Net VAT payable
Business value addition (Taka) Value Addition (Taka) (Taka) (Taka) (Treasury Deposit)
Manufacturer Input 1,000,000 - 1,000,000 150,000 150,000
Wholesaler Input 1,000,000 100,000 1,100,000 150,000 165,000 15,000
Retailer Input 1,100,000 165,000 1,265,000 165,000 189,750 24,750
189,750
34
4. An importer
Math #04
An importer imported 100 pieces of Motor cycle at C&F price Tk. 80,000 per piece. The
clearing and incidental charge amounted to Tk. 90,000 for the lot. He sold 90 pieces of cycle to
wholesaler at a margin of 10% exclusive of VAT which is 15% on the value of sale price. The
wholesaler charged 15% commission to sell it to retail seller to be sold from their sale center.
The retailers incur cost @ 1000 for maintenance and salary of persons of sale centre and
charge cost plus 10% margin.
Compute VAT assuming that retailers sold 70 pieces of cycle in the month of June 2015.
Solution #04
Import Stage:
Particular BDT
CIF value/imported price (100X80,000) 8,000,000
Add: C&F charge 90,000
Cost of 100 pieces 8,090,000
Cost of 90 pieces (8,090,000 X 90/90) 7,281,000
Add: Profit @ 10% of Tk 7,281,000 728,100
Selling price excluding VAT 8,009,100
Add: Output VAT of 90 Pcs @15% 1,201,365
Selling price including VAT 9,210,465
Wholesaller Stage:
Particular BDT
Cost of purchase 9,210,465
Less: Input VAT (1,201,365)
Purchase price excluding VAT 8,009,100
Add: Commission @ 15% 1,201,365
Add: Output vat @ 15% 1,381,570
35
Retailer Stage:
Particular BDT
Cost of 90 Pieces 10,592,035
Cost of 70 Pieces (10,592,035 X 70/90) 8,238,249.25
Less: Input VAT (1,381,570 X 70/90) (1,074,554.25)
Purchase price of 70 pieces excluding VAT 7,163,695
Maintenance (1000 X 70) 70,000
Total cost 7,233,695
Add: Profit @10% 723,370
Add: Output VAT of 70 Pcs @ 15% 1,193,560
Working:
Particular Importer Wholesaler Retailer
100 Pcs 90 Pcs 70 Pcs
Output VAT 1,201,365 1,381,570 1,193,560
Input VAT (1,201,365) (1,381,570)
Input VAT rebateable @ proportionate (1,201,365) (1,074,554)
VAT payable (Net VAT) 1,201,365 180,205 119,005
934,395 140,159 92,560

Total VAT for 70 pcs (70/90) = 934,395+140,159+92,560
= 1,167,114
5. Shova Enterprise Ltd
Match #05
At 30th June, 2016 the information regarding production and sales of Shova Enterprise Ltd. areas follows:-
Particulars BDT
Purchase of Raw Materials 200,000
Net wages 50,000
Excess Industrial Expenditure 50,000
Excess Administrative Expenditure 60,000
Expenditure for Sale 40,000
The company sells all of its goods adding 25% profit with total expenditure. Its starting stock of raw
materials and ending goods are Tk. 60,000 and Tk. 40,000 respectively. The quantity of ending stock
goods and raw materials are Tk. 80,000 and Tk. 20,000 respectively. If VAT is imposed @ 15%,
calculate the total amount thereof.
36
Solution #05
Particulars BDT
Opening Stock of Raw Materials 60,000
Add: Purchase of raw materials 200,000
Less: Closing stock of raw materials (20,000)
Add: Net wages 50,000
Prime cost 290,000
Add: Excess Industrial Expenditure 50,000
Excess Administrative expense 60,000
Expenditure for sale 40,000
Add: Opening stock of finished goods 40,000
Less: Closing stock of finished goods (80,000)
Cost of Sale 400,000
Add: Profit @25% on cost 100,000
Selling Price 500,000
Calculation of VAT:
Output VAT 500,000 @ 15% 75,000
Less: Input VAT 240,000 @ 15% 36,000
39,000
6. Importer Mr. Akbar
Math #06
An electronic goods importer Mr. Akbar purchased electronic parts at the cost
of Tk. 35,00,000 on the month of December 2016 and sold it to Khair & Co.
for Tk. 40,00,000. Using these parts Khair & Co. assemble 400 pcs of color
TV and sold it to East West Electric Co. for 56,00,000 who is a whole seller.
East West co. sold that goods (TV) to retail seller Lemo Int. for Tk. 80,00,000.
In each case and each stage 15% VAT was counted.
Determine VAT in each stage.
Solution #06
1) Account Mr. Akbar
Particulars VAT @ 15%
Amount
Paid Received
Imported electric goods 3,500,000 525,000 -
Sold to M/S Khair & Co. 4,000,000 600,000
VAT Payable 75,000
37
2) Account M/S Khair & Co.
Purchased from Mr. Akbar 4,000,000 600,000
Sold to M/S East West 5,600,000 840,000
VAT Payable 240,000
3) Account East West & Co.
Purchase from M/S Khair & Co 5,600,000 840,000
Sold to Lemo Int. 8,000,000 1,200,000
VAT Payable 360,000
Total VAT payable = 525,000+75,000+240,000+360,000 1,200,000
7. Unicom Bangladesh Ltd.
Math #07
The following information has been taken from the accounting records of Unicom
Bangladesh Ltd. for the year 2016.
BDT
Raw Materials inventory, January 01 90,000
Raw Materials inventory, December 31 60,000
Work in progress inventory, January 01 180,000
Work in progress inventory, December 31 100,000
Finished Goods inventory, January 01 260,000
Finished Goods inventory, December 31 210,000
Purchase of raw materials 750,000
Direct Labor 150,000. Manufacturing overhead 640,000. Selling expenses 140,000.

Administrative expense 270,000. Markup 15% on cost. Determine VAT.
Solution #07
Unicom Bangladesh Ltd
Particulars BDT
Opening Stock Raw materials 90,000
Add: Raw Materials Purchase 750,000
840,000
Closing Stock of Raw materials (60,000)
780,000
Add: Direct Labor 150,000
Manufacturing Overhead 640,000
Prime Cost 1,570,000
Add: Opening WIP 180,000
Less: Closing WIP (100,000)
Add: Opening finished goods 260,000
Less: Closing finished goods (210,000)
Total Cost 1,700,000
38
Add: Profit @ 15% on Cost 255,000
Selling Price 1,955,000
VAT Calculation:
VAT on Output 1,955,000 15% 293,250

Less: Input VAT 780,000 15% (117,000)
VAT Payable 176,250
8. ABC Ltd.
Math #08
ABC Ltd. provides the following information about its production and sales:
Particular BDT
Purchase of raw materials (Including VAT Tk. 300,000) 2,300,000
Direct wages 250,000
Electricity (Including VAT Tk. 3,000) 63,000
Telephone (Including VAT Tk. 1500) 11,500
Depreciation of machinery 30,000
Other production overhead 40,000
Other administrative overhead 70,000
Selling expenses 20,000
The company sells its products by adding 25% margin on cost. A trade discount of
5% is allowed. Other production and administration overheads and selling expenses
do not include any VAT. There were no opening & closing stock of raw materials.
Requirement:
Determine VAT payable if the rate is 15%, assuming that opening & closing stock of
finished goods were Tk. 30,000 and Tk. 20,000 respectively.
Solution #08
ABC Limited
Calculation of VAT payable
Particulars BDT
Opening raw material -
Add: Purchasing of raw material (excluding VAT) 2,000,000
Less: Closing stock of raw material -
Raw material used 2,000,000
Add: Direct labor/wages 250,000
Prime Cost 2,250,000
39
Factory Electricity (60,000+3000 X 20%) 60,600
Telephone (10,000+1500 X 20%) 10,300
Depreciation of machinery 30,000
Other production overhead 40,000
Other administration overhead 70,000
Selling Expense 20,000
Add: Opening stock of finished goods 30,000
Less: Closing stock of finished goods (20,000)
Total cost 2,490,900
Add: Profit @ 25% margin on cost 622,725
3,113,625
Less: 5% Rebate (155,681)
VATable price 2,957,944
Add: VAT @ 15% 443,692
VAT payable = Output VAT - Input VAT

= 443,692 - (30,000+2400+1200)
= 140,092
Note: 80% of VAT on Electricity bill & Telephone bill is rebatable.
9. Excellent Shoe Co. Ltd.
Math #09
Excellent Shoe Co. Ltd. had the following transactions in September 2016.
Raw materials aggregating to Tk. 500,000 were purchased on 5 September, 2016,
VAT on the same paid and the VAT challan along with the goods were received on
10 September, 2016.
Shoes delivered to customers in the month at approved price as follows:
Date Taka
8-Sep-16 300,000
9-Sep-16 200,000
10-Sep-16 500,000
15-Sep-16 600,000
The following deposits were made to the Govt. Exchequer through treasury challan:
7-Sep-16 20,000
12-Sep-16 30,000
15-Sep-16 70,000
40
Balance of deposit at 1 September 2016 in VAT-18 was Tk. 50,000.
You are required to:
i) Enter the above transactions in VAT-18 of company;
ii) Write a letter to the management on the irregularities noted by you in
completing the VAT current account (VAT-18) and implications of the same on
the company.
Solution #09
Excellent Shoe Co. Ltd.
VAT Current Account
Mushak-18
Account Current
Purchase/Sales Treasury Closing
SL. Date Description Rebate Due Remarks
Book Ref. Deposit Balance
1 2 3 4 5 6 7 8 9 10
1 1-Sep-16 Opening 50,000
2 7-Sep-16 Treasury Deposit 20,000 70,000

3 8-Sep-16 Sales 45,000 25,000
4 9-Sep-16 Sales 30,000 (5,000)
5 10-Sep-16 Purchase 75,000 70,000
6 10-Sep-16 Sales 75,000 (5,000)
9 15-Sep-16 Sales 90,000 5,000
Irregularities: As per Rule 22 (Gha), VAT current account should always have deposit or debit balance. In this case,
VAT current account has credit balance in two dates (9 & 10 Sept) which is incompliance with the rule.
10. ABC Ltd.
Math #10
ABC Ltd. Produces Duplex Board, declaring its price at Tk. 100,000 per metric ton.
Received an order on 20 June, 2015 from Lafaz Surma Cement Ltd. 'to deliver 500 metric
tons of duplex board on 25 June, 2015. It intended to deliver the goods on 25 June, 2016 if
VAT could be paid by then. The company had a VAT deposit balance on the morning of 25
June, 2015 in amount of Tk. 10,00,000. Calculate the amount to be deposited by the
company 25 June, 2015 to enable it to dispatch the goods on that date.
Solution #10
VAT Chargeable and payable on 500 MTs 100,000 X 500 X 15% 7,500,000.00
Less: VAT deposit balance on the morning of June 25, 2015 1,000,000.00
Further VAT deposit to made through Treasury Challan on June 25, 2015 6,500,000.00
41
11. Rahman International Pvt. Ltd.
Math #11
On January, 2015, Rahman International (Pvt.) Limited imported raw materials for school
bags amounting to Tk. 1,00,000 and sold it to Agfa Limited for Tk. 1,20,000. Using these
materials, Agfa Limited made 150 pieces of school bags and sold it to Yousuf & Sons, a
wholesaler, for Tk. 1,70,000. Yousuf & Sons sold the gabs to a retail seller Jaman
International for Tk. 2,00,000. Jaman International sold all the bags to various customers
for tk. 2,50,000. In each case and at each stage 15% VAT is to be considered. Compute
VAT in each case.
Solution #11
Amount Amount of VAT

VAT Paid By Value of Input Value of Value Addition Payment
(A) Output (B) C=(B-A) D=(C*15%)
At Import stage by Rahman
International (Pvt.) Ltd. 100,000.00 - 100,000.00 15,000.00
Sale of Imported Products by Rahman
International (Pvt) Ltd. 100,000.00 120,000.00 20,000.00 3,000.00
Producer Agfa Ltd. 120,000.00 170,000.00 50,000.00 7,500.00
Whole Seller (Yousuf & Sons) 170,000.00 200,000.00 30,000.00 4,500.00
Retailer (Jaman International) 200,000.00 250,000.00 50,000.00 7,500.00
Total VAT paid at different Stages 37,500.00
So, the total value of VAT amount is Tk. 37,000/= which is ultimately borne by the final consumer.
12. Mr. Habib
Math #12
Mr. Habib is a VAT registered trader. He has the following transactions in the month of July 2015
a) Goods purchased for Tk. 57,500 including VAT
b) The above goods have been sold for TK. 80,500 including VAT.
c) Tk. 3,000 deposited to Bangladesh Bank for VAT Current Account.
d) Out of the sold goods Tk. 4,600 have been returned
e) VAT return submitted after adjusting the input and output VAT.
Compute the balance of VAT Current Account and give the journal entries of these transactions.
Solution #12
The transactions that took place in 2015 by Mr. Habib are as under:
Particulars Amount VAT
a) Purchase of goods 57,500.00 7,500.00
b) Sales of goods 80,500.00 10,500.00
42
c) Deposit of VAT 3,000.00 3,000.00
d) Return of sold goods 4,600.00 600.00
Balance of VAT Current Account 600.00
Journal Entries Debit Credit
1) Purchase of goods Account 50,000.00
Input VAT Account 7,500.00
Trade Payable Account 57,500.00
2) Trade receivable Account 80,500.00
Sales Account 70,000.00
Output VAT Account 10,500.00
3) VAT Current Account 3000
Bank Account 3000
4) Sales Return Account 4,000.00
Output VAT Account 600.00
Trade Receivable Account 4,600.00
5) VAT Current Account 600.00
Bank Account 600.00
13. AB Ltd. ("Company")
Math #13
Question (a)
You are a VAT consultant licensed by National Board of Revenue and have been newly appointed
as a VAT outsourcing service provider of a manufacturing company, AB Ltd. ("Company").
Immediately after your appointment, submission of VAT return for the month of January 2015 has
become due. The Chief Financial Officer ("CFO") of the Company provides you with the following
particulars for the period from 01 January 2015 to 31 January 2015.
Raw materials worth Tk. 500,000/= were purchased and Tk. 1,500,000/= worth of finished goods
were sold during the month of January 2015. Applicable VAT rate is 15% in the case of
procurement of raw materials and sale of finished goods. 15% VAT was paid on procurement of
spare parts worth Tk. 100,000/= in January 2015. In addition, the amounts of VAT paid on various
expenditures incurred for the month of January 2015 are as follows:
Electricity Tk. 10,000/=
Audit Fee Tk. 30,000/=
Advertising Firm Tk. 15,000/=
Import of Machineries Tk. 25,000/=
43
You had a discussion with the CFO of AB Ltd. and came to know that the invoices raised by the
providers/suppliers of aforesaid services/goods are complaint with the provisions of VAT laws.
However, the advertising firm did not raise an invoice in Mushak-11 or invoice approved by the
competent VAT authority. All of the applicable VAT Registers, including Current Account, are
maintained by AB Ltd. Opening balance of the Current Account as of 01 January 2015 was Tk.
100,000/= and during the month of January 2015, Tk. 200,000/= was deposited in the government
treasury.
Requirement
Provide the CFO of AB Ltd. With computation of the following:
(a) Output VAT
(b) Input VAT credit
('c) Closing balance of the Current Account as of 31 January 2015
Solution #13
Answer (a)
Computation of VAT for the month of January 2015
Particulars Tk. Tk.
Opening Balance of Current Account of 01
January 2015 100,000.00
Add: Deposited in the government treasury 200,000.00
300,000.00
Less: Output VAT 1500000 15% 225,000.00
75,000.00
Add: Input VAT Credit:
Raw materials 500000 15% 75,000.00
Spare Parts 100000 15% 15,000.00
Electricity Bill 10000 80% 8,000.00
Audit Fee 30000 80% 24,000.00
Import of Machineries 25000 25,000.00 147,000.00
Closing Balance of Current Account as of 31 222,000.00

January 2015
Note:
(i) Input VAT Credit shall not be allowed for the VAT paid on expenditure for
repair of Building as per Section 9 (1) of the VAT Act, 1991.
(ii) Input VAT Credit shall not be allowed for the VAT paid on Advertisement
expenditure due to want of a valid VAT invoice (Mushak-11)
44
14. Three persons
Math #14
Three persons, as follows are in the process of starting new business and approach you for advice under Value
Added Tax Act 1991 considering the current provisions in force
i) A Chartered Accountant is obtaining 'Certificate of Practice' from ICAB to begin professional practice in
accounting and auditing with an estimated annual fee income of Tk. 7,500,000/=.
ii) A retired Biman Airlines Manager in the process of setting up a Tour Operator business. Estimated annual
commission income is Tk.6,500,000/=
iii) XYZ Ltd., a private limited company, operating from Kaptan Bazar, Dhaka, and already a VAT-registered
assesse, engaged in product distribution got a new national distributorship agreement from a Chinese
Manufacturer to import, stock and sell mobile handset in Bangladesh. Estimated annual turnover of XYZ Ltd.
from new handset dealership is Tk.25,000,000/=. Company plans to appoint District Distributors (DD) to sell
mobile handsets through selected retailers in major cities.
Requirement:
a) Please brief on the three persons shown in (i), (ii), (iii) above in connection with the compliance under VAT
law considering the provision now in force with respect to initial compliance obligation and statutory VAT
records. Examiner shall take into account mention of Codes, prescribed VAT Forms, Records and
Sections/Rules.
b) XYZ Ltd., the company in (iii) above requires additional advice on the formulation of the handset price at
various stages using the system of 'input VAT rebate claims' at each stages of delivery chain u/s 9 of the law.
Please make detailed computation of the PRICE in each stage up to MRP(Price to Distributor, Price to Retailer
and MRP) clearly showing input-output VAT adjustment and net VAT payable amount in each stage of
National Distributor (ND) and District Distributor. Your answer should also contain a reconciliation of the
'VAT (15%) on cost to retail' and summation of the VAT at earlier stages beginning from the import.
[Assume: Per unit landed cost of XYZ Ltd is Tk.5,500/= including import stage VAT (15%=650/=), AIT
(5%=165/=) and Advance Trade VAT (4%=220/=). ND margin 15% on Landed cost, Trade Promotion
expense, estimated damage recovery total 14% on 'value after ND margin'; DD margin 5% and Retailer margin
15%]
c) XYZ Ltd., the company in (iii) above may soon run out of space at the present rented premises upon
addition of new set of employees for handset dealership. The company has own bigger floor space in Uttara,
Dhaka. Management is considering option of moving from current rented space from Kaptan Bazar to own
space in Uttara, two being separate VAT divisions, Please advise Company on steps within the purview of
VAT law (mentioning Section, Rule and prescribed From) if the company decides to change office/store to
Uttara.
45
Solution #14
Answer (a)
(i) Chartered Accountants Firm:
a) VAT Registration
Initial compliance obligation is VAT registration under service Code S034 using Form VAT-6. Obtain VAT registration
certificate (VAT-8). Although it may appear that the firm will not be require to obtain VAT registration certificate rather
will be required to obtain turnover tax registration since their estimated annual turnover is less than the threshold i.e., Tk
80 lacs, as per the SRO# 641 of 2012, the firm must apply for the VAT registration irrespective of its annual turnover.
b) VAT payment
In most of the case the payer is responsible for deduction of VAT at source at the time of making payment to the CA firm.
The firm will be required to collect Mushak-12 (Kha) from the payer. VAT paid to the firm must be deposited to the
Government Exchequer before submission of the VAT return. VAT withheld from the service provider should also be
deposited to the government exchequer.
c) VAT return
VAT return (Mushak-19) must be filed to the respective circle within 15th day of the next month.
d) VAT record keeping
VAT-11, VAT-19, VAT-12 Kha, Treasury Challan, etc.
(ii) Tour Operator:
Tour operator is exempted from VAT. Reference: SRO # 176-Ain/2016/752-Mushak, dt. 02.06.2016. Therefore, no need
for VAT registration.
(iii) XYZ Ltd:

a) VAT Registration
XYZ is already a VAT registered person. Their type may be trader. However, we need to review the VAT registration
certificate as to whether their types also includes "importer" or not. If not then XYZ will be required to amend the VAT
registration to include importer in their VAT registration.
b) Price declaration
If the deemed value addition is 26.67%, XYZ will not be required to submit price declaration, otherwise they will be they
will be required to submit price declaration through Mushak-1Kha.
c) VAT payment
VAT is payable @15%. If the Value addition is 26.67%, XYZ will not be required to pay any VAT at the time of selling
goods to their customer since 4% ATV has already been deposited to the Government Exchequer at the time of
importation of the mobile handset.
If XYZ follows price declaration basis, they will be required to pay VAT on the value addition at the time of selling goods
to their customer @15% on value addition.
d) VAT return
VAT return (Mushak-19) must be filed to the respective circle within 15th day of the next month.
e) VAT record keeping
VAT records (as existing) are VAT-16, 17, 18. VAT-11 or 11Ka or 11Gha. VAT return-19. Other related documents to
support information in the statutory records.
Calculation o
46
Price compu
Answer (b):
Calculation of landed cost:

Total cost 5,500
VAT (650)
AIT (165)
ATV (220)
Landed cost 4,465
Price computation at each stage:

Value addition Output
Stage Input Output Input VAT Invoice price Net VAT
Margin Expense VAT
VAT paid at
import stage 870
XYZ 4,465 4,465 870 870 5,335 -
ND 4,465 670 719 5,854 870 878 6,732 8
DD 5,854 293 - 6,146 878 922 7,068 44
Retailer 6,146 922 - 7,068 922 1,060 8,128 138
Customer 7,068 - - - - - - -
Total 1,060
Total cost to be paid by customer: =7,068+(7,068*15%) = 8,128
Answer (C)
Rules 12 of the VAT Rule 1991 provides for formalities as to the change of business location and situation. This is,
however, not for ownership change. Application for 'change' of business location and nature should be done 14 days prior
to the change. All pending VAT must be paid off before the application or an undertaking on stamp paper to settle the
VAT or other liabilities with the VAT law. Any work stoppage at the present location must be informed to the respective
VAT circle. Physical change of the location and transfer of the stock-in-trade should not be done without clearance from
present VAT circle. Steps to be taken are as follows:
- Application for change of location in Form VAT-9 to present VAT Circle.
[Together with the attested copies of Trade License, Lease Agreement, NID, original VAT registration certificate,
application in plain paper, copies of pervious four months' VAT return.]
- VAT inspector shall visit the location to inspect stock-in-trade/other information of the XYZ Ltd.
-Information of such change and a copy of the application for change should also be filed with the new VAT circle under
new VAT division (as the change to a separate division, Uttara).
-After scrutiny and satisfaction, present VAT circle shall cause to transfer the VAT file of the assesse to the new VAT
Circle.
A new VAT registration is required to be obtained from the new transferee VAT division.
15. Tabia Limited
Math # 15
Tabia Limited is a cement manufacturing and marketing company. The company has two manufacturing
plants located at Chittagong and Dhaka and five depots located at Dhaka, Chittagong, Rajshahi, Khulna
and Sylhet. The company is maintaining three VAT registrations: one for each factory and one central
registration covering all sales outlets. You have been appointed as Manager-VAT and CFO of the company
requested you to prepare a report containing solutions to the following issues:
47
1. The output value of 1 bag cement produced and sold by the company is Tk. 300. The input cost of
cement is 60% of output value and the contribution of manufacturing and marketing activities towards
value addition is 60:40? Identify the amount of VAT to be paid by the company and treatment thereof
at each stage.
2. Clinker is one of the key raw materials for the manufacturing of cement. On May 1, 2016 the head of
supply chain informed that there is no clinker in Dhaka Factory and recommended transfer of 10 MT
clinker from Chittagong factory. The landed cost of each MT clinker is Tk. 150,000. What is the
procedure to be obliged by the company to ensure compliance with the VAT law for the transfer of
said clinker from Chittagong factory to Dhaka factory?
3. The head of sales informed that Messrs Yan Chu, a 100% exporter located at Chittagong EPZ, has
placed an order for 1000 bags of cement to consume as an ingredient of exportable products. What are
the formalities to be obliged by the company to enjoy the export benefit available under VAT Act
1991? What price the company can offer awarding said benefit to Messrs Yang Chu.
4. The head of Chittagong factory warehouse informed that 1 MT clinker involving a landed cost of Tk.
150,000 including input VAT leviable value of Tk. 100,000 was totally damaged by an accident and
needs immediate removal. What are the procedure to be obliged under VAT laws for the removal of
said material?
5. Messrs Yang Luck, a company based in Thailand has been providing technical service to the company
at an annual fee of USD 100,000. What are the provision of VAT laws in this regard?
6. The head of marketing informed that the company has introduced one special category of cement which
attracts 10% supplementary duty (SD) at manufacturing stage. The input cost of one bag such cement
is 70% of the output value of Tk. 400 and the contribution of manufacturing and marketing activities
towards the value addition is 50:50? Identify the amount of VAT and SD and treatment thereof at each
stage.
The procedure for the disposal of tax paid damaged input has been prescribed under Rule 40 of VAT Rules
1991. Accordingly, the company should follow the following procedure:
a) An application in prescribed proforma “Mushak–26” to the local Value Added Tax office requesting
approval for the removal of damaged clinker. “Mushak–26” has 8 columns and all information should
be filled therein properly.
Solution # 15
Tabia Limited
Category - Manufacturing & Marketing Company
VAT Reg No. Mfg stage Separate
Factory Dhaka 1 registration for two
Chittagong 2
48
Depot Dhaka 3 Central Depot
Chittagong
Raj
Khul
Shl.
BDT
1) Output Value per Bag 300.00
Input cost 180.00
Value addition 120.00
Mgf. Stage 72.00
Mkt. Stage 48.00
Computation of VAT
Mfg. Stage Input Cost 180.00
Value add 72.00
Output value 252.00
Vat payable 37.80
Input vat rebate 27.00
Treasury Deposit 10.80
Mkt. Stage Input Cost 252.00

Value add 48.00
Output value 300.00
Vat payable 45.00
Input vat rebate 37.80
Note:
a) Company's all depots are to be taken under central registration - Section
15 & Rules - 9 of VAT Act 1991
b) Musuk - 11 Challan to be issued at two stages of value addition -
Section 32 & Rules 16 of VAT Act 1991
c) Price to be declared from both Mfg. and Mkt. stages (Central Depot)
section 5 & Rules 3 of VAT Act 1991
d) Output Tax Mfg. stage will be considered as Input VAT of Mkt. stage
(central depot)
2) RM Clinker
Transfer 10 MT from Ctg Factory to Dhaka
VAT Reg.
49
Factory BDT per MT BDT - 10 MT
Ctg Factory 150,000.00 1,500,000.00
Value addition @ 26.67% 40,005.00 400,050.00
VATable value 190,005.00 1,900,050.00
VAT payable 28,500.75 285,007.50
Dhaka Factory input value 190,005.00 1,900,050.00

Input VAT 28,500.75 285,007.50
Note:
a) Price declaration Musuk - 1 by Ctg factory, section 5 & Rules 3 of
VAT Act 1991.
b) Value addition minimum 26.26% or actual value addition - SRO
242/Aine/2012/659Mushok.
c) Transfer through Musuk-11 Challan by Ctg factory.
d) Main document bill of Entry or Musuk-11 challan.
3)
BDT Per Bag BDT-1000 Bag
Value 300.00 300,000.00
VAT at Zero rate - -
Invoice value 300.00 300,000.00
Less: Input VAT rebate 27.00 27,000.00
Quoted
Further price 273.00 273,000.00
reduction
Note:
a) Price to be declared in prescribed proforma Musuk-1Ga.
b) Price to be negotiated and recovered in Foreign Currency
c) Opening of L/C or Contract agreement
d) Commercial Documents to be approved by Bank & VAT authority
e) Musuk-20 to be approved by VAT Authority
f) Proceed Realization Certificate (PRC) from Bank
4) 1 MT Clinker RM damage
BDT
VAT livable value 100,000.00
Input VAT @ 15% 15,000.00
a) As per
Note:
VAT Rules
c)
b) Report
Deduct from Purchase Register (M-16) both Qty. and Value.
to the VAT
50
5) Tabia Ltd. Will deposit an amount equivalent to USD 15,000 at the
time of the remittance of annual fee of USD 100,000. The amount of
VAT deposit amounts to USD 15,000 is considered as input VAT and
rebatable in the account of Tabia Ltd. Under section 9 and rule 18 of
VAT Act-1991. This annual technical service fee should be shown as
service cost by Tabia Ltd. in their price declaration from (Mushak-1).
Otherwise said rebate could not be taken.
6) Computation of VAT & SD of special category of Cement
Determination of Value addition
BDT
Output Value 400.00
Input Cost 70% thereof 280.00
Value Addition 120.00
Value Addition at Mfg stage 60.00
Value Addition at Mkt stage 60.00
*Mfg Stage:
A. Input Cost 280.00
B. Value Addition (D-A) 29.09
D. SD Leviable price (E-D) 309.09
D. SD @10% thereon (340X10/110) 30.91
E. VAT leviable price (280+60) 340.00
VAT @15% 51.00
Less: Input VAT 42.00
Treasury deposit 9.00
*We have VAT leviable price. So here back calculation is the simplest
method
Mkt Stage:
Input Cost 340.00
Value addition 400.00
VAT thereon 60.00
Input VAT 51.00
VAT is leviable also on SD and SD is not rebatable. Therefore, SD has
been considered as an element of value addition.
51
16. Exchange Rate
Math #16
Invoice value shown on proforma invoice USD $ 100 (exchange rate
USD $ 1= Tk. 80). Taxes and duties charge on it respectively CD
25%, RD 5% & SD 10%. All are paid at import point. VAT and
advance income tax also suffered at prescribed rate.
Solution #16
Invoice value (proforma invoice) USD 100

Exchange rate Tk 80
Invoice value in BDT 8,000
Add: Adjustment @ 1% 80
Assessed Value (AV) 8,080
CD @ 25% (on 8080) 2,020
RD @ 5% (on 8080) 404
10,504
SD @ 10% (on 10504) 1,050
VATable Amount 11,554
VAT @ 15% 1,733
ATV [(AV+CD+RD+SD) X 1.2667]*.04 585
AIT @ 5% on AV 404
PSI @ 1% on invoice value 81
17. Biki (Bangladesh) Co. Ltd.
Math #17
Biki (Bangladesh) Co. Ltd. Engaged in trading business of consumable goods. In the income year
ended 31 December, 2015 the company procured the following goods for commercial purpose:
Purchase from
Date Description Import
Local Market
Jul-11 Goods imported at C&F price goods purchased USD 500,000 2,000,000
Oct-16 Goods imported at C&F price goods purchased USD 400,000 3,000,000
Assuming import duty @25%, supplementary duty @25% and regulatory duty @5% was paid at
import point. VAT and advance tax was also suffered at applicable rates at import stage. Custom's
assessed value for goods imported in July 2015 and October 2015 was USD 550,000 and USD
440,000 respectively.
All the imported goods were sold to one special customer. The customer did not deduct any income
tax at the time of making payments to Biki (BD) Co. Ltd.
Goods Purchased locally were sold to five customers - A, B, C, D & E
52
Sales to Customer
Date Total
A B C D E
10-Jul-15 200,000 150,000 300,000 80,000 400,000 1,130,000
24-Oct-15 400,000 500,000 300,000 700,000 500,000 2,400,000
28-Nov-15 500,000 300,000 400,000 400,000 400,000 2,000,000
[Exchange Rate to be used USD 1 = Tk. 80]
From the above, you are required to -

i) Calculate AIT, CD, SD, RD, VAT and ATV suffered by Biki at import point.
ii) Calculate AIT deducted at source by each customer.
iii) Compute income tax liability of Biki Ltd. Under section 82 of ITO 1984 (Corporate tax may be considered as
35%)
Solution #17
i) Calculation of AIT, CD, SD, RD, VAT & ATV
1 2 3 4 5 6 7 8 9 10
C&F Value Custom's AV
C&F Value Custom's AV CD RD SD ATV AIT VAT
Date of import BDT USD to Tk
USD USD @25% @ 5% @ 25% @ 4% @ 5% @ 15%
($1=Tk. 80) ($1=Tk. 80)
(4X25%) (4X5%) (4+5+6)X25% (4+5+6+7)X4% (4X5%) (4+5+6+7)X15%
15-Jul 500 40,000 550 44,000 11,000 2,200 14,300 3,623 1,760 10,725
15-Oct 400 32,000 440 35,200 8,800 1,760 11,440 2,898 1,408 8,580
Total 900 72,000 990 79,200 19,800 3,960 25,740 6,521 3,168 19,305
ii) Calculation of Income Tax deducted at source

A B C D E Total
Total 1,100,000 950,000 1,000,000 1,180,000 1,300,000 5,530,000
TDS @2.5% 27,500 23,750 25,000 29,500 32,500 138,250
iii) Calculation of Total Income and Tax Liability:
Applicable Total income
Goods Sold to TDS (Tk.)
Tax Rate u/s 82C
Imported Goods
($9.9lacX80X5%) 3,960,000 35% 11,314,286
Local Purchased
goods 138,250 35% 395,000
11,709,286
Tax Liability
4,098,250 Already paid
= 3,960,000+138,250
18. XYZ Ltd.
Math #18
Blue and White soap
XYZ Ltd. is selling two types of soap named 'Blue' and 'White'. Blue is manufactured in its own plant and
white is in the plant of its outsourcing partner ABC Ltd. The cost of the Blue soap is tk 12 & selling price
including VAT is tk 20. The cost of the White soap including processing charge of tk 2 paid to ABC is tk 10
which they sale to customer with 10% margin.
53
Compute the price to be declared to the VAT authority by XYZ Ltd. and ABC Ltd. and intimate the
justification of your computation to the CFO of XYZ Ltd.
Solution #18
A. Computation of price of blue soap Taka
Selling price including VAT 20
VAT considering the rate u/s 3 ( 20*15/115) 2.61
Price to be declared 17.39
B. Computation of the price of White soap Taka
Cost of the soap 10
Profit (10%) (10*.10/.90) 1.11
Price to be declared 11.11
C. Justification to the CFO
In presence of section 5 (2) (Ka) of VAT act 1991, read with Govt. order #5/ MUSHAK/2012 dated
07.06.2012, the company will declare taka 2.00 as processing cost received from the owner ABC
Limited to the VAT Authority & pay tax there as.
19. A manufacturer
Math #19
A manufacturer sold goods worth Tk. 10 lakh to the wholesaler by including VAT @ 15%.
The wholesaler added 10% as mark up and sold the goods to the retailer by adding VAT who
in turn sold the goods to the consumer by adding markup @ 15%. Compute VAT at each
stage and indicate the total VAT paid by the consumer.
Solution #19
Particulars Manufacturer Whole Saler Retailer Consumer

TK. TK. TK. TK.
(a) Cost of goods 1,150,000 1,265,000 1,454,750
(b) Input VAT Recoverable 150,000 165,000
(c') Net cost of goods sold 1,000,000 1,100,000 1,454,750
(d) Mark-up 100,000 165,000
(e) Selling price Net of VAT 1,000,000 1,100,000 1,265,000
(f) VAT chargeable 150,000 165,000 189,750
(g) Gross selling price 1,150,000 1,265,000 1,454,750
Gross VAT due 150,000 165,000 189,750
VAT recoverable - 150,000 165,000
Net VAT payable 150,000 15,000 24,750
VAT borne by the Consumer = 189,750
54
20. SOS Company
Math #20
SOS Company provides the following information about its production and sales:
Taka
Purchase of Raw Materials 2,000,000
Direct wages 250,000
Administrative expenses 70,000
Selling expenses 20,000
Depreciation of Machinery 30,000
The company sells its products by adding 25% margin on cost. The opening and
closing stock of Raw Materials recorded at Tk. 50,000 and Tk. 40,000
respectively.
Determine VAT if the rate is 15% assuming that opening and closing stock of
finished goods were Tk. 30,000 and Tk. 20,000 respectively.
Solution #20
SOS Company
Determination of VAT
Particulars Tk. Tk.
Opening Stock of Raw Materials 50,000
Purchase of Raw Materials 2,000,000
Sub-total 2,050,000
Less: Closing Stock of Raw Materials 40,000
Raw Materials Consumed 2,010,000
Direct Wages 250,000
Depreciation on Machinery 30,000
Factory Cost 2,290,000
Administration Expenses 70,000
Production Cost 2,360,000
Add: Opening Stock of Finished Goods 30,000
Sub-total 2,390,000
Less: Closing Stock of Finished Goods (20,000)
Sub-total 2,370,000
Selling Expenses 20,000
Cost of Goods Sold 2,390,000
Add: Profit @ 25% 597,500
VAT on Selling Price (2,987,500 X 15%) 448,125
VAT paid on Raw Material Consumed
(20,10,000 X 15%) 301,500
Addition VAT paid on output stage 146,625
55
21. Manan Traders
Math # 21
Manan traders, an importer, imported 200 of AC at CIF price @ TK 100,000 per piece. The clearing and other
incidental charges amounted to TK 100,000 for the total consignment. He sold 80 pieces of AC to a whole seller at a
markup of 10% (exclusive of VAT). The whole seller charge 10% markup to sale it to retailers. The retailers incurred a
cost @ TK 2000 for maintenance and other expenses and added 10% markup to the price.
Required:
Compute VAT assuming that the retailers sold 60 pices of AC in a trade fair among various customers in the month of
June, 2015.
Solution# 21
Stage 1: Importer Tk.

CIF price of imported goods 20,000,000
Add:
Clearing and other charges 100,000
Total cost of input 20,100,000
Input VAT recoverable 0
Net COGS (for 200 units) 20,100,000
Net COGS (for 80 units) 8,040,000
Add: Profit 804000
Add: Output VAT @ 15% 1,326,600
Stage 2: Whole seller Tk.

Cost of purchase from importer 10,170,600
Less:
Input VAT recoverable (1,326,600)
Net COGS 8,844,000
Add: Profit @ 10% 884,400
Add: Output VAT @15% 1,459,260
56
Stage 3: Retailer Tk.
Cost from wholesaler (80 units) 11,187,660
Cost of 60 units 8,390,745
Less: Input Vat recoverable (1,459,260X60/80) (1,094,445)
Net COGS excluding VAT 7,296,300
Maintenance and selling (2000X60) 120000
Total COGS 7,416,300
Add: Profit @ 10% 741,630
Add: Output VAT @15% 1,223,690
Stage 4: Final Consumer Tk.
Cost of purchase from Retailers (60 units) 8,381,620 Input VAT recoverable
Importer Wholesaler Retailers Consumer

Particulars
(200 units) (80 units) (60 units) (60 units)
Output VAT 1,326,600 1,459,260 1,223,690
Less: Input VAT - (1,326,600) (1,094,445)
Gross VAT Payable 1,326,600 132,660 129,245
994,950 99,495 129,245 1,223,690
57

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TAXATION

Value Added Tax – Theory and Illustrative examples

Value Added Tax covering FY 2016-17

Particulars Rate of VAT

Standard Rate 15%

Export and Deemed Export 0%

Business (other than medicine and petroleum) 4%

Business (Medicine and Petroleum) 2%

Service 1.5%, 2%, 2.5%, 4%, 4.5%, 5%, 5.5%,

 2. Identify the differences between VAT & Sales Tax

SL# VAT Sales Tax

 3. Discuss the Advantages & Disadvantages of VAT

CD AV 50,000 25% 12,500

SD AV+CD+RD 65,000 20% 13,000

VAT AV+CD+RD+SD 78,000 15% 11,700

Advance Income Tax

PSI Service Charge AV 50,000 1% 500

Sl. Offences Penalties

As per section 37(2), if any person:

Sl. Offences Penalties

 28. Cottage industry in our VAT law.

 29. VAT administration.

Administrative Authority Judicial Authority

3. Commissioner large unit – VAT.

4. Director General-Audit & Inspection;

7. Joint Commissioner, VAT

8. Deputy Commissioner, VAT

9. Assistant Commissioner, VAT

10. Superintendent, VAT

11. Inspector VAT

12. Other VAT officer with any designation, which include

 30. Books and Documents Require to be Maintained for VAT Purposes:

If assessable value for customs duty (CD) is Tk.100

Value of inputs = Tk. 156.00

 42. Special treatment of Specified “Input Tax”

 48. Whether rebate on VAT, ID, SD and AIT can be obtained?

SL. Particulars VAT (Value Added Tax) TOT (Turnover Tax)

7. Deduction at VAT can be deducted at sources. TOT cannot be deducted at sources.

 59. Supplementary Duty?

 60. What is truncated value?

SL# Taxable Services Value Addition VAT

1. Motor Vehicle garage and workshop 30% of total receipts 4.5%

2. Construction Contractors 30% of total receipts 4.5%

3. Building Developers 10% of total receipts 1.5%

4. Consultancy and supervisory firm 30% of total receipts 4.5%

5. Securities Service 30% of total receipts 4.5%

 61. VAT assessments/duties and responsibilities of VAT assesse.

 62. Discuss some important features of VAT in Bangladesh.

Otherwise, it shall be deemed to have been disposed of favoring the Assesse.

1. Sun Moon Company

PSI :1% of assessable value: @ 1% on 2,200,000 = 22,000

934,395 140,159 92,560

5. Shova Enterprise Ltd

6. Importer Mr. Akbar

7. Unicom Bangladesh Ltd.

Direct Labor 150,000. Manufacturing overhead 640,000. Selling expenses 140,000.

VAT on Output 1,955,000 15% 293,250

VAT payable = Output VAT - Input VAT

9. Excellent Shoe Co. Ltd.

2 7-Sep-16 Treasury Deposit 20,000 70,000

10. ABC Ltd.

Amount Amount of VAT

12. Mr. Habib