Tax Seminar - Salient Features of Finance Bill 2019 (Tax and VAT)

Rahman Rahman Huq
Technical Seminar on Finance Bil 2019

(Proposed amendments to Income Tax and VAT provisions)
16 June 2019
Sal i e nt Features
Introduction
of Fi n ance Bi l 2019
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Dear Guests
Welcome to KPMG/Rahman Rahman Huq’s Technical Seminar on Finance Bill 2019.
As you know, the Finance Bill will now be debated in Parliament, perhaps amended to an extent, and final version is expected to become law as Finance Act 2019.
In our experience however, most of the key provisions in such bills remain largely unchanged.
We have compiled today’s presentation and this booklet for sharing the key provisions of Finance Bill 2019 with you. Errors and omissions, may happen, for which
we seek your understanding. In any event, the contents of today’s presentation and this booklet cannot be taken as a comprehensive analysis of either the Bill, or
Income Tax and VAT proposals contained in the Bill. More importantly, no decision should be taken exclusively on the basis of today’s presentation or this booklet;
we recommend you obtain professional advice tailored to your specific circumstances.
Our objective for today is to bring to your knowledge, in a concise and organised manner, the key proposals in the Bill regarding Income Tax and VAT. We trust you
will find this initiative beneficial.
Thank you.
Adeeb H. Khan
Senior Partner
Dhaka, 16 June 2019
2019 Rahman Rahman Huq, a partnership firm registered in Bangladesh and a member firm of the K PMG network of independent
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member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Sal i
Index
e nt Features of Fi n ance Bi l 2019
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Proposals in connection with Income Tax 3 - 12
Proposals/changes in connection with Value Added Tax (VAT) 13 – 25
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Sal i e nt Features of Fi n ance Bi l 2019
Proposals in connection with Income Tax
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1. Tax rates for individual and firm remain unchanged as follows:
Total annual income Income tax rate

First Tk 250,000 Nil
Next Tk 400,000 10%
Next Tk 500,000 15%
Next Tk 600,000 20%
Next Tk 3,000,000 25%
Balance amount 30%
Initial exemption limit for women and senior citizens aged 65 years or over is Tk 300,000; for physically challenged persons is Tk 400,000 and for gazetted
war-wounded freedom fighters is Tk 425,000.
In case of parent/legal guardian of a physically challenged person, he/she will get a further initial exemption of Tk 50,000 in addition to above limit.
Dividend received by an individual is exempted up to Tk. 50,000.
2. Non-residents
As before, non-residents other than Bangladeshi non-residents shall pay tax on the total income at the maximum rate of 30%.
3. Minimum tax payable
As before, minimum tax payable is as follows depending on location of the assessee:
Location Minimum tax

Within Dhaka and Chittagong City Corporations Tk 5,000
Any other City Corporation Tk 4,000
Other than City Corporation Tk 3,000
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Proposals in connection with Income Tax (contd.)
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4. Charge of surcharge
Surcharge is payable by an individual assessee on total tax payable if the total net worth exceeds Tk 30 million as stated below:
Total net worth Rate Minimum

surcharge
Over Tk 30 million to Tk 50 million or owner of more than 1 motor car or owner of a flat of 8,000 sft size within city corporation area 10% 3,000
Over Tk 50 million to Tk 100 million 15%
Over Tk 100 million to Tk 150 million 20% 5,000
Over Tk 150 million to Tk 200 million 25%
Over Tk 200 million 30%
However, if the total net wealth is Tk. 500 million or more, surcharge will be higher of the following:
a) 0.1% of net wealth; and

b) 30% of surcharge on total tax.
5. Investment tax rebate
Allowable limit of investment tax rebate is as follows:
Total income Investment tax rebate

Total income up to Tk. 1.5 million 15% of the eligible amount
Total income above Tk. 1.5 million 10 % of the eligible amount
Eligible amount is the lowest of the following:

a) Actual investment; or
b) 25% of total income or
c) Tk. 15 million
Purchase of computer or laptop will not be considered for investment tax rebate calculation.
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6. Statement of assets, liabilities and lifestyle
An individual assessee must submit the statement of assets, liabilities and lifestyle, if he
a) Has a gross wealth over Tk 2.5 million;

b) Owns a motor car; or
c) Has made an investment in a house property or an apartment in the city corporation area.
If any individual, not being a shareholder director, has income from salary or income from business or profession which does not exceed Tk 0.3 million, he may
opt not to submit the statement of lifestyle.
7. Tax rates for corporate
Applicable tax rates for companies remain unchanged as follows:
Companies Rate
Publicly traded companies i.e. companies listed with any stock exchanges in Bangladesh other than banks, insurance and other financial 25%
institutions, merchant banks, mobile phone operator companies and cigarette, zarda, chewing tobacco, gul or any other smokeless tobacco
product manufacturing companies
Non-listed companies including branch companies other than banks, insurance and other financial institutions, merchant banks, mobile phone 35%
operator companies and cigarette, zarda, chewing tobacco, gul or any other smokeless tobacco product manufacturing companies
If non-listed companies including mobile phone operator other than banks, insurance and other financial institutions, merchant banks companies
and cigarette, zarda, chewing tobacco, gul or any other smokeless tobacco product manufacturing companies list at least 20% of their paid up
capital, they shall receive a rebate of 10% in the year of listing
Banks, insurance and other financial institutions (except merchant banks) if not publicly listed 40%
Banks, insurance and other financial institutions (except merchant banks) if publicly listed 37.5%
Merchant banks 37.5%
Cigarette, zarda, chewing tobacco, gul or any other smokeless tobacco product manufacturing companies (companies, firms and individuals) 45%
irrespective of listing; and
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Companies Rate
Surcharge in addition to above tax is applicable on business income 2.5%
Mobile phone operator companies if not publicly listed as below 45%
Mobile phone operator companies that convert themselves into a publicly traded company by transfer of at least 10% shares through stock 40%
exchanges, of which maximum 5% may be through Pre-Initial Public Offering Placement
Readymade Garments sector (from budget speech) 12%
Textile sector (from budget speech) 15%
Readymade Garments sector with internationally recognised green building certificate (from budget speech) 10%
Co-operative society registered under Co-operative Society Act 2001 other than income from agricultural or cottage sector 15%
Dividend income 20%
For mobile phone operators, minimum tax has been proposed at 2% of gross receipts. Earlier it was 0.75%.
8. Inclusion in the definition under section 2 of the Income Tax Ordinance
Definition of Perquisite
The definition of “Perquisite” has been amended in the definition section of tax law. Any payment as incentive bonus is excluded from perquisite whilst leave
fare assistance is considered as perquisite.
Definition of Resident
The definition of resident now includes trust, fund, entity and local authority. The control and management of affairs is to be situated wholly in Bangladesh.
Definition of Royalty
An explanation is provided for royalty. The following will also be treated as royalty:
- Possession or control of such right, property or information is with the payer;

- Such right, property or information is used directly by the payer; and
- The location of such right, property or information is in Bangladesh.
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It is also clarified that, “process” part of the definition includes transmission by satellite (including up-linking, amplification, conversion for down-linking of any
signal) cable, optical fibre or by any other similar technology, whether or not such process is secret.
9. Inclusion of “tax on stock dividend”
15% tax on stock dividend (interim or other) will be payable within 60 days from the date of declaration by listed companies.
10. Inclusion of “tax on retained earnings”
If total of retained earnings, any reserve and any other equity (excluding paid up capital) of a listed company exceeds 50% of the paid up capital of the
company, tax will be payable at 15% on such excess.
So, tax will be applicable @ 15% on [(total retained earnings + any reserve + any other equity except paid up capital) less 50% of paid up capital)].
11. Inclusion made in the section 19 “Unexplained investments etc., deemed to be income”
a) Any advance received without bank transfer by any house property owner exceeding Tk. 0.2 million will be considered as deemed income. Moreover, any
advance rent unadjusted within the earlier of 5 years or agreement period will be considered as deemed income.
b) Any payment made for acquiring any asset without withholding tax compliance will be considered as deemed income.
12. Special tax treatment in section 19BBBBB
The invested amount in the construction or purchase of residential building, apartment, or land will be deemed to have been explained if specified amount of
tax was paid before the assessment for the relevant assessment year.
13. Special tax treatment in respect of investment in “Economic Zones or Hi-Tech Parks”
No question shall be raised to the source of any sum invested in any economic zone or any hi-tech park, if 10% of invested amount is paid as tax before filing
of the tax return.
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14. Inclusion of Treatment of disallowances
Any amount of disallowances made under section 30 shall be treated separately as “Income from business or profession” and the tax shall be payable thereon
at the regular rate. It is applicable irrespective of 82C business and any loss or profit computed under regular “Income from business or profession”
15. Exemption from tax of newly established industrial undertakings set up between the period from July 2019 to June 2024
If the industrial undertaking is set-up in Dhaka, Mymensingh and Chattogram divisions, excluding Dhaka, Narayanganj, Gazipur, Chattogram, Rangamati,
Bandarban and Khagrachari districts, then tax exemption will be applicable as below:
Period of exemption Rate of exemption

For the first year 90% of income
For the second year 80% of income
For the third year 60% of income
For the fourth year 40% of income
For the fifth year 20% of income
If the industrial undertaking is set-up in Rajshahi, Khulna, Sylhet, Barishal and Rangpur divisions (excluding City Corporation area) and Rangamati,
Bandarban and Khagrachari districts, then tax exemption will be applicable as below:

For the first and second year 90% of income
For the sixth year 50% of income
For the seventh year 40% of income
For the eighth year 30% of income
For the ninth year 20% of income
For the tenth year 10% of income
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New "industrial undertaking" means: an industry engaged in or in the production of, active pharmaceuticals ingredient and radio pharmaceuticals; agriculture
machineries; automatic bricks; automobile; barrier contraceptive and rubber latex; basic components of electronics (e.g. resistor, capacitor, transistor,
integrated circuit, multilayer PCB etc.); bi-cycle including parts thereof; bio-fertilizer; biotechnology based agro products; boiler including parts and equipment
thereof; compressor including parts thereof computer hardware; furniture; home appliances (blender, rice cooker, microwave oven, electric oven, washing
machine, induction cooker, water filter etc.); insecticides or pesticides; leather and leather goods; LED TV; locally produced fruits and vegetables processing;
mobile phone; petro-chemicals; pharmaceuticals; plastic recycling; textile machinery; tissue grafting; toy manufacturing; tyre manufacturing; and any other
category of industrial undertaking as the Government may, by notification in the official Gazette, specify.
As per the new law, Industrial undertaking shall not include expansion of any existing undertaking facility. The exemption will be available subject to fulfilling of
some conditions and compliances.
16. Exemption from tax of newly established physical infrastructure facility set up between the period from July 2019 to June 2024

For the first and second year 90% of income
For the sixth year 50% of income
For the seventh year 40% of income
For the eighth year 30% of income
For the ninth year 20% of income
For the tenth year 10% of income
As per new section "industrial undertaking" refer to deep sea port; elevated expressway; export processing zone; flyover; gas pipe line; Hi-tech park;
Information and Communication Technology (ICT) village or software technology zone; Information Technology (IT) park; large water treatment plant and
supply through pipe line; Liquefied Natural Gas (LNG) terminal and transmission line; mobile phone tower or tower sharing infrastructure; mono-rail; rapid
transit; renewable energy (e.g. solar energy plant, windmill); sea or river port; (xvi) toll road or bridge; underground rail; waste treatment plant; or any other
category of physical infrastructure facility as the Government may, by notification in the official Gazette, specify.
As per the new law, the exemption will be available subject to fulfilling of some conditions and compliances.
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17. Amendment of deduction from payment to contractors (Section 52, Rule 16)
The rate of tax is amended as follows:
Sl. Base value Rates of deduction

(1) Up to Tk. 2.5 million (from budget speech) 2%
(2) Above Tk. 2.5 million but below Tk. 5 million 3%
(3) Above Tk. 5 million but below 10 million 4%
(4) Above 10 million 5%
Moreover, for any goods supplied on which tax has been paid at source under section 53E, tax at source on the said supply shall be B-A, where:
A = the amount of tax paid under section 53E
B = the amount of tax applicable under this section if no tax were paid under section 53E.
18. Inclusion of certain service in section 52AA
Service Base amount does Base amount does

not exceed Tk. 2.5m not exceed Tk. 2.5m
Courier service On commission 10% 12%
On gross bill 1.5% 2%
Packing and Shifting service On commission 10% 12%
On gross bill 1.5% 2%
Wheeling charge for electricity transmission 4% 5%
If media buying agency invoice shows both the commission and gross bill, then 10% will be deemed commission and 2.5% withholding tax will be applicable.
19. Change in tax rate on interest income on saving instrument
The withholding tax rate on interest income on saving instrument will be 10% instead of 5%.
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20. Inclusion of hotel accommodation
Hotel accommodation is included under house property and tax to be withheld under section 53A.
21. Change in withholding tax rate on export cash subsidy
The withholding tax rate on export cash subsidy will be 10% instead of 3%.
22. Inclusion of non-resident companies being beneficiary of taxed dividend
Non-resident companies will also enjoy the benefit of taxed dividend. “Taxed dividend” means the dividend income on which tax has been paid by the recipient
under this Ordinance”.
23. Inclusion in section 56 (deduction from income of non-residents)
The following types of services have been added in the list:
Description of services or payments Withholding tax rate

Survey for coal, oil or gas exploration 5.25%
Fees, etc. of surveyors of general insurance company 20%
Time limit has been specified for issuing exemption or reduced rate certificate by NBR to 30 days after submission of all required documents.
Relevant authority will ask for applicable tax on capital gain arising from the transfer any share of a company.
24. Return to be submitted
The following are required to submit income tax return in Bangladesh under section 75:
- Non-resident having permanent establishment in Bangladesh

- Micro Credit Organisation having licence with Micro Credit Regulatory Authority
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25. Submission of withholding tax return
Micro Credit Organisation having licence with Micro Credit Regulatory Authority, private university, private hospital, clinic, diagnostic centre, firm and
association of persons will be required to submit withholding tax return.
26. Issuance of notice under section 93
The DCT can issue notice any time within 6 years from the end of relevant assessment year.
27. Assessment without jurisdiction
If any income tax authority makes any assessment beyond jurisdiction, it shall be considered without lawful authority and shall stand annulled and such
assessment shall be made by an income tax authority having proper jurisdiction within two years from the end of the assessment year in which the income
was first assessable.
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Proposals/Changes in connection with Value Added Tax (VAT)
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1. Implementation of new VAT regulations
The entire VAT and Supplementary Duty Act 2012 (VAT and SD Act 2012) and the VAT and Supplementary Duty Rules 2016 (VAT and SD Rules 2016) will
come into force from 1 July 2019. Accordingly, the VAT Act 1991, the VAT Rules 1991 and all the SROs (Statutory Regulatory Orders) and Orders issued
under the previous Act will be repealed from 1 July 2019.
2. Threshold for Turnover tax registration
The turnover threshold for Turnover tax registration is now BDT 5 million which was earlier BDT 3 million as per VAT and SD Act 2012. The maximum
turnover limit for Turnover tax registration is BDT 30 million. In case of exceeding BDT 30 million of turnover, entities are required to seek VAT registration.
3. Threshold for VAT registration
The turnover threshold for VAT registration is now BDT 30 million which was earlier BDT 8 million as per VAT and SD Act 2012.
4. Increase of turnover tax
Turnover tax rate is proposed to make increase from 3% to 4%.
5. Obligation of VAT registration
Generally, every person who crosses the turnover limit of BDT 30 million for last twelve months will fall under the obligation of VAT registration. Additionally,
the following persons, irrespective of their turnover, will be subject to VAT registration:
 Supplier of goods or services which are subject to supplementary duty

 Participant for tender or work order
 Importer and Exporter
 Listed withholding entities
 Any other person recommended by the National Board of Revenue
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Proposals/Changes in connection with Value Added Tax (VAT) (contd.)
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6. Central registration versus Unit registration
Obligation of central registration comes when common types of products or services are supplied from different locations. In such case, all the locations will
come under single VAT registration where books and records are maintained. Alternatively, if the concerned persons supply different types of products or
services from different locations then each location will be subject to VAT registration as unit.
Furthermore, as it is noted that transfer of goods or services between one unit to another unit by a centrally registered person will not be considered as
supplies. As a result, this internal transaction will not result in output VAT liability and input VAT credit.
7. Changes in the regulation for application of VAT
Generally, VAT rate for supplies or import of taxable goods or services is 15%. However, a condition has newly been inserted for application of reduced VAT
rates for certain categories of goods and services, rates varying from 2% to 10%. Accordingly, a third schedule has been introduced for addressing the
reduced VAT rate matters. Below we have highlighted reduced VAT rates for certain services, along with comparison to existing VAT rates applicable:
Service New VAT rate Existing VAT rate as

SL No. Name of the Service Status
Code from 1 July 2019 per VAT Act 1991
S012 S012.14 Internet 5% 5% No change
S014 S014.00 Indenting firm 5% 15% Decreased
S024 S024.20 Furniture showroom 5% 5% No change
S026 S026.00 Goldsmith and Silversmith 5% 5% No change
S036 S036.20 AC launch service 5% 15% Decreased
S048 S048.00 Transport contractor (petroleum products) 5% 5% No change
S057 S057.00 Electricity distributor 5% 5% No change
S069 S069.00 English Medium School 5% 5% No change
S099 S099.10 Information Technology Enabled Services 5% 5% No change
S001 S001.20 Non AC hotel and restaurant 7.5% 7% Increased
S004 S004.00 Construction contractor 7.5% 7% Increased
S024 S024.10 Furniture manufacturer 7.5% 7% Increased
S037 S037.00 Procurement provider 7.5% 5% Increased
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Service New VAT rate Existing VAT rate as

SL No. Name of the Service Status
Code from 1 July 2019 per VAT Act 1991
S060 S060.00 Buyer of auctioned goods 7.5% 5% Increased
S064 S064.10 Amusement park and theme park 7.5% 15% Decreased
S078 S078.00 Seller of both own and others brand readymade garments 7.5% 5% Increased
S079 S079.00 Social media and virtual business 7.5% 5% Increased
S003 S003.10 Motor car garage and workshop 10% 10% No change
S003 S003.20 Dockyard 10% 10% No change
S008 S008.10 Printing press 10% 15% Decreased
S009 S009.00 Auction firm 10% 15% Decreased
S013 S013.00 Automated laundry 10% 15% Decreased
S018 S018.00 Film studio 10% 15% Decreased
S023 S023.10 Cinema hall 10% 15% Decreased
S023 S023.20 Film producer 10% 15% Decreased
S031 S031.00 Repair and maintenance 10% 15% Decreased
S040 S040.00 Security service 10% 15% Decreased
S042 S042.00 Automated saw mill 10% 15% Decreased
S047 S047.00 Sports organizer 10% 15% Decreased
S048 S048.00 Transport contractor (except petroleum goods) 10% 10% No change
S053 S053.00 Board meeting participants 10% 15% Decreased
S063 S063.00 Tailoring shop and tailors 10% 15% Decreased
S065 S065.00 Building, floor, compound cleaning or maintenance service provider 10% 15% Decreased
S066 S066.00 Lottery ticket seller 10% 15% Decreased
S076 S076.00 Social and sports related club 10% 15% Decreased
S010 S010.10 Land developer 3% 3% No change
Building construction firm
a) Up to 1,600 square feet 2% 2%
S010 S010.20 No change
b) Above 1,600 square feet 4.5% 4.5%
c) Reregistration irrespective of size 2% 2%
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8. Changes in trade VAT regulation
When VAT and SD Act 2012 was enacted, it did not contain the concept of trade VAT. This has now been introduced into the Act through Finance bill 2019. At
trading stage, rate of VAT is 5% for all the supplies, except medicine petroleum products for which applicable trade VAT is 2.4% and 2%, respectively.
There is no other regulation prescribed for traders under the VAT and SD Act 2012. Hence, there is no scope for a local trader to exercise the standard VAT
rate of 15% for claiming the input VAT credit against purchase – something that was possible under the outgoing VAT Act1991. With the implementation of
new VAT Act, traders can no longer apply the 15% VAT from 1 July 2019.
9. Increase of advance trade VAT
The VAT and SD Act 2012 was enacted with prescribed advance trade VAT rate of 3%. This has now been increased to 5% through Finance Bill 2019. This
higher rate of 5% exists in VAT Act 1991. Hence, effectively there would not be any impact from 1 July 2019 for advance trade VAT.
10. Base value for determination of VAT
Generally, the value of the taxable supplies will be the amount derived by reducing the tax fraction [(VAT rate / (100+VAT rate)] from the consideration or fair
value. However, following mechanism need to be ensured in determining the base value of the taxable supplies;
 If the transaction takes place among associated entities, fair market value of that taxable supplies should be taken into consideration. If the transaction
results in tax rebate for the associate entity, this fair market value consideration is not required;
 Taxable supplies with no consideration will be subject to consideration of fair market value for determination of VAT; and
 There is a requirement of submission of input-output co-efficient to the VAT authority in prescribed form in case of all taxable supplies.
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11. VAT payment mechanism
The existing VAT Act 1991 VAT payment mechanism requires registered persons to maintain positive balance in their current account with the VAT authority
before conducting any sales. Hence, VAT is paid in advance to the VAT authority either through treasury deposits or excess input VAT payments into
government exchequer.
The new VAT Act does not require registered person to make any advance payment of VAT or to maintain positive VAT current account balance before
conducting sales. Thus, registered persons under new VAT Act will pay the net payable, if any (i.e. Output VAT less input VAT and other adjustments) within
15 days following the month end at the time of submission of VAT return.
Hence, there is no longer a requirement of maintaining VAT current account (a key characteristic of VAT Act 1991) for VAT payment and input VAT credit.
12. Input VAT rebate
A registered person shall generally be entitled to an input tax credit against the VAT imposed on a taxable supply or a taxable import, with a few exception
cases. Earlier when VAT Act 2012 was enacted, these exception cases were limited to the following general business items:
 In case of taxable supply exceeding BDT 1, 00,000 (one lakh), the consideration, in part or in full, against that supply is paid in cash instead of banking
channel.
 If claim of an input tax credit is not made either in the tax period in which VAT is paid or within the two succeeding tax periods, and such claim of input
tax.
Now the list of exception cases have been extended with consideration of existing exception cases of input VAT credit of the VAT Act 1991. The new
exception cases are listed below:
 VAT paid on the goods under the custody or possession or occupancy of other person
 VAT paid on inputs that have not been entered into the Purchase Register prescribed by Rules
 In case of inputs released furnishing Bank Guarantee, VAT involved with Bank Guarantee portion, until the causes for which Bank Guarantee was
furnished have been finally settled
 VAT paid on inputs used in the production of exempted goods
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 Turnover Tax paid on inputs procured from a Turnover Taxpayer

 Supplementary Duty paid on inputs used in the production of goods or rendering of service
 Any VAT paid for the purchase by the persons whose VAT rates are below 15% or specified VAT rates
 Any input items not mentioned in the input-output VAT co-efficient
13. Regulation of withholding VAT
There is a regulation made for withholding VAT under the VAT and SD Act 2012. The key points are highlighted below:
13.1. “Withholding entity" means:
(a) Ministry, board, authority, semi-government, autonomous body, state owned entity, local authority or similar types of institutes;
(b) Non-government organisations approved by the NGO Affairs Bureau or the Directorate-General of Social Welfare;
(c) Banks, insurance companies or similar financial institutions;
(d) Post-secondary educational institutions;
(e) Any limited company; and
(f) Any institute having turnover of more than BDT 10 million.
Effectively, the definition has been expanded to include private limited companies and any institutes having turnover of more than BDT 10 million.
13.2 Rate of withholding VAT
 In case of 15% VAT rate the withholding amount will be 1/3 of the 15% of consideration
 In case of reduced or specified VAT rates the withholding VAT amount will be full amount of VAT
13.3. No withholding VAT is applicable from the consideration of the taxable goods and services supplied by the withholding entities.
13.4. No withholding VAT is applicable for the supply of utilities like fuel, gas, electricity, water (WASA), telephone, and mobile bill. This regulation exists
under the outgoing VAT Act 1991.
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14. Guidelines on VAT implication in transitional period
14.1 Registration
Existing circumstances Guidelines

VAT registration under Value Added Tax Act, 1991 Re-registration under VAT and SD Act, 2012 must be obtained as soon as possible.
In this regard, registered person should follow the prescribed declared regulation
from online project.
Registered under Value Added Tax Act, 1991 but annual To be enlisted under the category of turnover tax. If the company wants, it can take
turnover is less than Tk. 30, 000,000. voluntary VAT registration.
Company was required to be registered under VAT Act, 1991 To be registered under VAT and SD Act, 2012 at the earliest otherwise legal action
but it did not take VAT registration. will be taken against it.
14.2 Rebate and Current Account

Treatment of rebate regarding Release of goods by using 11 It will be decreasing adjustment in VAT return abiding by the all rules in law
digit old BIN and purchase of input goods through Mushak- 11
up to 30 June, 2019
Adjustment of closing balance lying with Current Account As per rule 118 of VAT and Supplementary Duty Rules, 2012, there will decreasing
Register under Value Added Tax Act, 1991 adjustment in the VAT return. (*please see below diagram about rule 118 for
adjustment of current account balance)
Input VAT rebate about tariff based goods 1. If tariff based goods and services of The VAT Act 1991 are now considered
under 15% VAT, a decreasing adjustment can be made for total amount of VAT
associating with the inputs stored in the production place.
2. If tariff based goods and services of The VAT Act 1991 are not considered for
15% VAT, no decreasing adjustment is possible in the VAT return for inputs
stored in the production place.
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*Adjustment of closing balance lying with Current Account Register under Value Added Tax Act, 1991 (Rule 118)
Application to the Commissioner with Following persons are not

Decreasing adjustment in each submitted return (Mushak-19) of VAT eligible to adjust the current
Process
tax period of the maximum 10% Act, 1991 account balance:
amount of net payable 1. If he is not registered
person under VAT Act.
2. If there remains any
Commissioner, upon verification, will undisposed case pending
issue a certificate in Mushak 18.6 against him.
3. Any appeal or writ remains
pending.
On the basis of certificate (i.e. Mushak 4. Any arrear tax remains
18.6), closing balance shall be unrealised.
disposed
14.3 Treatment of price declaration regarding any goods to be produced on or before 30 June 2019 but supply of these goods will take place on or after
1 July 2019.
Price declaration is not required for the sale goods after 1 July 2019. Instead, there is a requirement of submission of input-output coefficient in a prescribed
format for all products.
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14.4 Withholding Tax

Treatment of withholding tax in case of any supply made or invoice If any of the following three events take place after 1 July 2019, relevant withholding
issued or payment made on or before 1st July, 2019 VAT regulations of the VAT Act 2012 and VAT Rules 2016 should be followed:
(a) Supply of services, (b) Issuance of Mushak Challan (VAT Form), and (c)
Settlement of the invoice.
Adjustment of the Mushak- 12kha which is supposed to be received The withholding VAT certificate (Mushak 12kha) issued under the VAT Act 1991 will
as per VAT Act, 1991 after the period of 1 July 2019 be considered for decreasing adjustment in the month of issuance of the certificate,
no matter if it is issued after 1 July 2019.
14.5 Goods supplied at uniform price under the VAT 1991
As per the VAT Act 1991, if any goods are supplied at uniform price, all the VAT is deposited at first stage of the transaction after consideration of all
subsequent value chain of the goods. In such case, there should not be any VAT implication for subsequent transactions. Under these circumstances, if any
goods on which VAT is collected at first stage remains unsold as on 1 July 2019, such goods should not be subject to VAT when it will be sold after 1 July
2019 under the legislation of VAT and SD Act 2012. Considering this fact, NBR has issued a clear guideline as follows:
The goods which will The VAT paid on A copy of sales register As per Subsection The stock of
remain unsold as on the unsold goods (Mushak-17) where unsold 1 of Section 138 these goods
30 June 2019 should under uniform goods are recorded will be of the VAT Act should be
be updated on the price mechanism submitted with VAT return of 2012, no VAT will finished as
column of “closing will be reported in June 2019. A copy should be be applicable for soon as
stock” of sales register the VAT return of preserved by the registered sale of those possible.
(i.e. Mushak 17). June 2019. persons for 5 years. unsold goods.
14.6 Settlement of VAT disputes (Appeal)
10% VAT deposited at the time of application of Appeal under the VAT Act 1991 can be adjusted through decreasing or increasing adjustment of the VAT
return based on the winner of the case. If the tax payer wins the case, a decreasing adjustment would be made and vice versa.
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14.7 VAT implication to the construction contractor for the contract made before 1 July 2019
VAT implication will, as usual, be determined based on the VAT and Supplementary Duty Act 2012. There is no separate mechanism guided for construction
services for the transitional period.
14.8 Duty drawback/ refund claimed or arose on export during the transitional period

In case of submission of application for It will be settled by Duty Exemption and Drawback Office (DEDO) in according to the VAT Act
drawback/refund until 30 June 2019 1991.
In case of export made under the VAT Act 1991 on or An application for drawback/refund has to be submitted to the Director General, Duty Exemption
before 30 June 2019 and Drawback Office (DEDO). The Director General will settle the case following the regulation
of the VAT Act 1991
In case of duty drawback for export, zero rated An application for drawback/refund has to be submitted to the Director General, Duty Exemption
supplies and import duty for the import relating to and Drawback Office (DEDO) of the Customs Division of National Board of Revenue. The
export resulted on or after 1 July 2019 Director General will settle the case following the regulation of The Customs Act, 1969.
15. Reconciliation of some important points in the light of outgoing VAT Act, 1991 and incoming VAT and supplementary duty Act, 2012
Subject
matters of The VAT Act, 1991 The VAT and SD Act, 2012 Comments
comparison
There is no rule for advance VAT payment.
In current VAT Act advance VAT payment is made
VAT Current Registered person will deposit net VAT liability
through VAT current account at the time of sale of More realistic and friendly
Account through submission of VAT return at the end of
goods.
month.
If common or different types of goods or services If common products are sold from different
Significant changes in the
VAT are sold from different places, every location should locations with maintaining books and accounts
regulation of VAT
Registration be subject to VAT registration. There is no general centrally, central VAT registration is applicable.
registration
concept of central VAT registration for supplies of On the other hand, unit VAT registration for each
22
_____________________________________________________________________________________________________________
Subject
comparison
common products from different places. different location will be required if products sold
from different locations are different.
As per VAT and SD Act 2012, internal transfer of
Internal transfer As per VAT Act 1991, internal transfer of goods and
goods and services from one branch to another Positive and practical
of goods and services from one branch to another branch of a
branch of a centrally registered person will not changes
Services company/entity would make VAT implication.
create any implication.
Currently, prior price declaration with maintaining There is no necessity for price declaration.
input-output co-efficient is required to be submitted Instead, registered person is required to submit Some relaxation for the
Price declaration
submit the concerned VAT office before sale of input-output coefficient to the concerned VAT supplier of taxable supplies
goods office before sale of goods
In new VAT Act, there is an exemption threshold
It helps small organisation
Exemption In current VAT Act, there is no exemption threshold of BDT 5 million. It means any person having
remaining outside the VAT
threshold for turnover tax and VAT registration. turnover of BDT 5 million will not be subject to
network
VAT network.
In current VAT Act, a person having any turnover up In new VAT Act, a person having turnover It helps reduce the tax
Turnover tax
to BDT 8 million is subject to turnover tax between BDT 5 million to 30 million is subject to liability for small and
threshold
registration. turnover tax registration. medium industries
VAT registration In current VAT Act, a person having turnover more In new VAT Act, a person having turnover more
More realistic changes
threshold than BDT 8 million is subject to VAT registration. than BDT 30 million is subject to VAT registration.
Rate of Tax burden will be increased
Turnover Tax Currently, it is 3% As per VAT and SD Act 2012, it would be 4%. for turnover tax registered
person.
Trade VAT In current VAT Act, a trader can follow three In new VAT Act, trader has no scope to exercise
methods standard VAT rate of 15%. It means that trader
i) Standard VAT rate mechanism VAT rate is fixed at 5%. Strict regulation for the local
trade to keep its VAT rate as
ii) At 5% rate
5%.
iii) Proportional method
23
_____________________________________________________________________________________________________________
Subject
comparison
Books and In current VAT Act 1991, books and records are In new VAT Act, books and records are Some relaxation to the VAT
Records maintained for 6 years. maintained for 5 years. registered person
There is no specified goods or services for
withholding VAT. Rather, it depends on the status
of the customer. If the customer is considered as
withholding entity, it will must deduct VAT from
Scope of 39 services are categorised for withholding VAT in the payment to the non-withholding entity. Significant changes in the
withholding VAT full. withholding VAT regulation
No customer will deduct withholding VAT from the
payment to the supplier if supplier is a withholding
entity.
There are two mechanism such as:
In case of standard VAT rate of 15%, the

withholding VAT amount will be one third of the
Rate of
Entire applicable VAT amount applicable VAT amount of the particular VAT-payer friendly
withholding VAT
transaction.
In case of reduced or specified VAT rate, it will be

entire applicable VAT amount.
VAT Calculation If it would follow the standard VAT mechanism (i.e. Under new VAT Act, no VAT current account is As there is no requirement
method application of 15% VAT) to get the input VAT credit, maintained for calculating VAT. Here VAT is of advance VAT payment
calculation of VAT would be maintained through calculated as based on the forecast of
maintaining current account positive balance (Output VAT+ increase adjustment - input VAT + sales, it would be very
considering that Standard VAT mechanism is decreasing adjustment). friendly to the VAT payer.
followed:
(Input VAT+ Treasury deposit – Out put VAT) Under the new mechanism,
24
_____________________________________________________________________________________________________________
Subject
comparison
VAT will be paid on the
actual transaction basis.
Under new VAT Act, there is an opportunity to
extend the time limit (maximum 1 month) for the
Under current VAT Act there is no option to extend
submission of VAT return or submission of
Submission of the time limit for the submission of VAT return or It is more user friendly and
revised VAT return for any arithmetical correction
VAT Return any correction of VAT return realistic
of VAT return. However, for the extension of
period, pay 2% simple interest per month will be
applicable
Currently, advance trade VAT is 5% only for the In new VAT Act advance trade VAT of 5% is
Advance Trade It will be cash-flow burden
commercial importer who import goods for trading applicable for all import goods by any registered
VAT for the industrial importer
purpose person.
In new VAT act progressive and periodic supply
Progress and In current VAT Act progressive and periodic supply Acting to the current
has been explained specifically in order to
Periodic Supply is not addressed or determined specifically business
address the continuous supply.
25
Sal i
Notes
e nt Features of Fi n ance Bi l 2019
_____________________________________________________________________________________________________________
26
Rahman Rahman Huq
Chartered Accountants
Contact us!
Dhaka Chattogram
9 & 5 Mohakhali C/A 78 Agrabad C/A (13th Floor)
Dhaka 1212 Chattogram
Bangladesh Bangladesh
T +880 2 988 6450 – 2 T +880 31 710704, 710996
F +880 2 988 6449 F +880 31 2520795
E dhaka@kpmg.com E chittagong@kpmg.com
kpmg.com/bd
kpmg.com/socialmedia kpmg.com/app
© 2019 Rahman Rahman Huq, a partnership firm registered in Bangladesh and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved. Printed in Bangladesh.
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Tax Seminar - Salient Features of Finance Bill 2019 (Tax and VAT)

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Tax Seminar - Salient Features of Finance Bill 2019 (Tax and VAT)

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Rahman Rahman Huq

Technical Seminar on Finance Bil 2019

Welcome to KPMG/Rahman Rahman Huq’s Technical Seminar on Finance Bill 2019.

Dhaka, 16 June 2019

Proposals in connection with Income Tax 3 - 12

Proposals/changes in connection with Value Added Tax (VAT) 13 – 25

1. Tax rates for individual and firm remain unchanged as follows:

Total annual income Income tax rate

Dividend received by an individual is exempted up to Tk. 50,000.

3. Minimum tax payable

As before, minimum tax payable is as follows depending on location of the assessee:

Location Minimum tax

Total net worth Rate Minimum

a) 0.1% of net wealth; and

5. Investment tax rebate

Allowable limit of investment tax rebate is as follows:

Total income Investment tax rebate

Eligible amount is the lowest of the following:

6. Statement of assets, liabilities and lifestyle

a) Has a gross wealth over Tk 2.5 million;

7. Tax rates for corporate

Applicable tax rates for companies remain unchanged as follows:

8. Inclusion in the definition under section 2 of the Income Tax Ordinance

- Possession or control of such right, property or information is with the payer;

9. Inclusion of “tax on stock dividend”

10. Inclusion of “tax on retained earnings”

12. Special tax treatment in section 19BBBBB

14. Inclusion of Treatment of disallowances

Period of exemption Rate of exemption

Period of exemption Rate of exemption

Period of exemption Rate of exemption

The rate of tax is amended as follows:

Sl. Base value Rates of deduction

18. Inclusion of certain service in section 52AA

Service Base amount does Base amount does

19. Change in tax rate on interest income on saving instrument

20. Inclusion of hotel accommodation

21. Change in withholding tax rate on export cash subsidy

22. Inclusion of non-resident companies being beneficiary of taxed dividend

23. Inclusion in section 56 (deduction from income of non-residents)

The following types of services have been added in the list:

Description of services or payments Withholding tax rate

24. Return to be submitted

- Non-resident having permanent establishment in Bangladesh

25. Submission of withholding tax return

26. Issuance of notice under section 93

27. Assessment without jurisdiction

1. Implementation of new VAT regulations

2. Threshold for Turnover tax registration

3. Threshold for VAT registration

4. Increase of turnover tax

Turnover tax rate is proposed to make increase from 3% to 4%.

5. Obligation of VAT registration

 Supplier of goods or services which are subject to supplementary duty

6. Central registration versus Unit registration

7. Changes in the regulation for application of VAT

Service New VAT rate Existing VAT rate as

Service New VAT rate Existing VAT rate as

8. Changes in trade VAT regulation

9. Increase of advance trade VAT

10. Base value for determination of VAT

11. VAT payment mechanism

12. Input VAT rebate