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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