Tk 24,000 crore VAT entangled in legal web

In the fiscal year 2023-24, the National Board of Revenue (NBR) had set a target of collecting Tk 4 lakh 30 thousand crore as revenue. However, the actual collection fell short of this ambitious target, reaching only Tk 4 lakh 10 thousand crore. Despite this, satisfactory revenue collection did not occur. In the first seven months of the fiscal year (July to December), revenue collection stood at only 48.4% of the annual target.

During this period, revenue collection from customs duties, VAT, and income tax amounted to 1 lakh 97 thousand 839 crore taka.

The target for revenue collection by the NBR during this period was set at 2 lakh 15 thousand 590 crore taka. None of the three revenue categories could achieve their targets during the period under review. There was a shortfall of 17,751 crore taka in revenue collection.

During the first seven months of the fiscal year, there was a shortfall of 3,293 crore taka in VAT revenue. Revenue collection from VAT amounted to Tk 77,224 crore, while the target was Tk 80,517 crore. There were various reasons behind the failure to achieve the VAT revenue target.

According to the NBR's accounts, there is a pending VAT amount of 24,641 crore taka. For this reason, there have been 10,301 cases filed at various times. Despite resolving a large number of cases every month, new cases continue to arise. Although the Revenue Board has taken various initiatives to expedite case disposal, they have not been effective.

Outside the prescribed process of the court, the process of resolving disputes or appeals related to customs and VAT under the jurisdiction of the ADRC or the NBR is not reducing the complexity of the cases. The majority of cases are related to the issuance of VAT certificates. There are 3,559 cases in this category, resulting in the government being owed Tk 264 crore in revenue.

Additionally, as of January of the upcoming year, there are outstanding amounts of revenue stuck in 27 cases at the Appeals Commissionerate, totaling Tk 83 crore. At the Appellate Tribunal, there are 202 cases stuck, amounting to Tk 248 crore, and at the High Court Division, revenue of Tk 18,782 crore is stuck in 3,486 cases. In the Appeals Division, revenue of 1,279 crore taka is stuck in 139 cases, while in the VAT 14.1-A category, revenue of 532 crore taka is stuck in 1,582 cases.

Furthermore, in Alternative Dispute Resolution (ADR), revenue of 386 crore taka is stuck in 35 cases, and in other categories, revenue of 2,063 crore taka is stuck in 1,271 cases, owed to the government. Altogether, in 10,301 cases, revenue of 24,000 crore taka is stuck.

Regarding this matter, on condition of anonymity, a senior official at the NBR told Views Bangladesh that VAT implementation began in the country in the 1990s. VAT was introduced as law in July 1991. Since then, VAT exemptions and VAT cases have started. Companies do not want to pay VAT. Even though they go to the High Court to evade VAT, they remain reluctant.

According to sources, in January of the upcoming year, there are 171 new cases in eight VAT categories, where revenue of 279 crore taka is stuck. In the same month, 139 cases have been disposed of, resulting in a reduction (received by the NBR) of 68 crore taka in revenue. Until January 2024, a total of 1,590 cases have been disposed of, resulting in a reduction of 2,759 crore taka in revenue.

However, efforts have been taken by the NBR to reduce the number of pending cases, as mentioned by the organization's member (VAT Inspection) Dr. Md. Shahidul Islam.

He informed Views Bangladesh that instructions have been given to field offices through the ADR system for expedited disposal of cases using more effective means. Cases have been slightly reduced compared to before.

Regarding this issue, former NBR member Abdul Mannan said that companies do not want to pay large amounts of VAT collectively. Therefore, they engage in VAT evasion cases. They manage time in various processes including cases, hearings, and appeals. If they lose the case, they have to pay the entire VAT amount along with penalties.

In the past and upcoming fiscal years (2023-24, 2024-25, and 2025-26), the NBR is aiming to collect approximately 5 lakh 17 thousand 700 crore taka in revenue. However, there are significant obstacles to this collection, primarily due to VAT-related cases and revenue stuck in them.

Stakeholders emphasize that increasing VAT collection relies significantly on the installation of Electronic Fiscal Devices (EFDs) and Sales Data Controllers (SDCs) nationwide. A plan is in place to install three lakh EFD machines across the country over five years. If this plan succeeds, revenue collection will increase. Additionally, disparities in VAT rates will be reduced.

Currently, different VAT rates exist on many items, with rates as high as 15% and up to 7% on e-commerce. These discrepancies will be addressed. Furthermore, the NBR has highlighted the need for administrative reforms to increase VAT collection.