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A VAT & Tax Audit in Bangladesh involves a thorough examination of a taxpayer’s financial records and transactions to ensure compliance with VAT and tax regulations. From preparation to Documentation review to Follow-Up, Every step should be thoroughly checked and Reviewed.
At (S&C), we make sure these steps are well followed so that You can focus back on your company.
In today’s rapidly changing landscape, stringent regulations, digital transformation, competition, and the need to build trust in capital markets are reshaping the audit field faster than ever.
Question: How can S&C help us navigate these changes and ensure compliance?
Leading businesses are addressing these challenges head-on, investing in technologies and new business models to meet current demands and stay ahead of the curve.
At Shubhankar & Co. (S&C), we are committed to fostering confidence and trust through a deep understanding of the businesses we audit and enhancing transparency. Stakeholders need greater assurance and value from audits, and they count on our insights as trusted advisors to inform decision-making.
Our multidisciplinary teams tackle the most complex issues using a global audit methodology and the latest auditing tools and technologies. Clients benefit from our sector expertise and global insights tailored to their needs.
We have invested in digital technology to equip our auditors with tools that deliver a digital audit, transforming how we assess risks and opportunities, uncovering potential issues, and providing valuable insights. This leads to new ways of doing business and managing risks.
Audits must deliver stakeholder confidence while meeting regulatory scrutiny and must, therefore, be executed with the utmost quality and efficiency. We strive to offer exceptional service to every client, regardless of their size, scope, structure, or sector.
Our teams combine traditional skills like accounting and skepticism with expertise in analytics automation. By collaborating closely with clients, S&C professionals bring the best of their skills to every engagement.
The parliament approved a new VAT and Supplementary Duty Act in 2012, which took effect in July 2019. The standard VAT rate is still 15%. Despite VAT being levied on goods and services at various stages such as import, manufacturing, delivery, or trading, Bangladesh extensively uses a truncated base tax system. Businesses with annual sales exceeding BDT 8 million are required to pay a 15% turnover tax instead of VAT.
The new act precisely defines VAT refund rules. Excess input VAT over output VAT is carried forward for six tax periods. If not exhausted, taxpayers can receive a refund within three months of application.
All companies must obtain a VAT registration certificate, followed by a Business Identification Number (BIN) for tax filing. Applications should be submitted to a (deputy) VAT commissioner. After scrutiny, a registration certificate with BIN or turnover tax enlistment certificate is issued via the VAT system within three working days
The National Board of Revenue (NBR) identified several products and services that can’t be shown as inputs for claiming VAT rebate.
The VAT wing of the NBR issued an order stating these products and services won’t be considered as inputs.
According to VAT law, businesses can get a VAT refund or adjust VAT paid for inputs. The order was issued due to a significant revenue shortfall in the 2019-20 fiscal year, with a Tk 53.54 billion shortfall in the first two months.
Higher VAT rebates due to unclear input definitions contributed to the shortfall. Large manufacturers claimed unusual services and products as inputs for VAT rebate.
NBR Order: Six categories of services and products won’t be considered inputs:
Renovation, modernization, construction, replacement, expansion or repairing of land, building, office, equipment, and fixtures
Purchase and repair of furniture, office supplies, stationery, refrigerator, freezer, air conditioner, fan, lighting
Interior design, architectural planning, transport rent, travel, entertainment, workers’ welfare, development activities
Rent of business premises, offices, showrooms
According to third schedule, section 3, businesses can claim input tax rebate on products for sale or business operations.
The order was issued under VAT and Supplementary Duty (SD) rules, 2016, rule 118 Ka, signed by VAT second secretary Hassan Muhammad Tarek Rikabder. The order addresses complexities faced by field-level VAT offices due to unclear input definitions.
Under the new VAT law, manufacturers must declare the materials used in production. Some large companies declared unusual items as inputs, which were not defined in the law.
In the VAT law-1991, labor, land, building, office equipment, and transportation were excluded from inputs, while raw materials, laboratory reagents, fuels, gas, packaging materials, services, and spare parts were defined as inputs.
However, due to the manual VAT collection process, businessmen faced hassles in obtaining refunds even after applying.
Export Refunds:
2017-18: Tk 103 crore
2015-16: Tk 96 crore
2014-15: Tk 114 crore
2013-14: Tk 108 crore
