The National Board of Revenue (NBR) has made VAT registration mandatory for businesses of some 174 categories, irrespective of their annual business turnover as specified in the VAT and Supplementary Duty Act 2012.
The VAT Policy Wing issued a guideline on Sunday, making VAT registration and payment mandatory for businesses of a number of products and services.
The guideline came following a widespread confusion over the category of businesses that would enjoy VAT exemption or turnover VAT.
In the new VAT law, which came into effect from July 01, 2019, the NBR incorporated a provision of VAT exemption ceiling for small businesses for the first time.
According to the provision, the small businesses having an annual turnover below Tk 5.0 million are entitled to enjoy VAT exemption.
Besides, the businesses with an annual turnover from Tk 5.0 million to Tk 30 million are eligible to enjoy a reduced rate of VAT, known as turnover VAT, paying only 4.0 per cent instead of the regular rates, ranging from 5.0 per cent to 15 per cent.
However, both the VAT officials and the businesses were puzzled regarding the new provision.
The VAT officials feared a significant amount of revenue loss due to misuse of the benefit, while the businesses aired concern over unusual harassment by the VAT officials.
After implementing the new VAT law, many of the businesses started claiming themselves as belonging to small category to enjoy the VAT exemption or turnover VAT, officials said.
Recently, the NBR Chairman Md Mosharraf Hossain Bhuiyan, in a programme, also said most of the businesses are claiming that they have an annual business turnover below Tk 30 million to evade VAT.
Talking to the FE, a senior VAT official said the NBR has singled out some producers, service providers and businesses, which would not be considered as small traders.
"After implementing the new VAT law, the VAT Wing feared that the existing VAT net might be squeezed in case of misuse of the exemption and turnover VAT ceiling."
As per the new VAT law, the NBR has the authority to specify the businesses, services and products for mandatory VAT registration and payment, he also said.
The small businesses, which sell retail products, would continue to enjoy the VAT exemption as per the new law, he added.
Under the guideline, suppliers of cement, all types of ceramic and porcelain products, GP sheet, CI sheet, mild steel products, sanitary ware, aluminium fittings, air-conditioner, refrigerator, television and other electrical and electronics products will have to pay VAT.
Service sector entities under the purview of VAT include hotel, restaurant, decorator and caterer, motor car garage and workshop, dock yard, construction firm, godown, port, advertising firm, printing press, auction organisation, land development organisation, building construction organisation, telephone, teleprinter, telex, fax or internet, SIM card supplier, mechanised laundry, banking and non-banking services, credit card supplier, money changer, credit rating agency, courier, beauty parlour, freight forwarder, indenting agency, ride sharing, and coaching centre etc.
The list also includes manufacturers of milk product, starch, gum, glucose, chocolate, noodles, jam and jelly, pickles, sauce, China clay, marble stone, glycerine, antiseptic, ink, mosquito coil, toilet and tissue paper, packaging material, woollen fabrics, cotton yarn, fishing net, brick, detergent, soap, match, PVC pipe and plastic container, particle board, hard board, leather product, foam, tyre tube, ply wood, cotton fabrics and yarn, synthetic fibre, glassware, rubber product, wood product, insulation board, pulp, knitted fabrics, carbon rod, scrap, MS product, sanitary ware, steel ingot, stainless steel, gas burner, television, electric bulb, and bicycle parts etc.