Guideline on VDS and steps to be taken afterwards

In my earlier post I mentioned 35 sectors from which VAT is to be deducted at sources. In this post I will discuss about the explanations given by the NBR through General Order no. -09/MUSHAK/2011, dated 12 October 2011.

As mentioned earlier there are 35 sectors from which VAT to be deducted/collected at source. Among those 35 sectors there are 17 sectors from which the deduction rate is truncated base (i.e. less than 15%). In case of truncated base deduction, availability of “Mushak-11” challan is not mandatory. In all other cases VAT is to be deducted at 15% rate. No deduction is applicable without these sectors. But in this case purchase is to be made from any organization registered under VAT.

15% VAT is to be collected from Government, Semi-Government, Autonomous bodies, Local Authority and Limited Companies at the time of receipt of money as license fee or renewal fee. Incase of receipt of revenue sharing money, royalty fee, commission, charge, or any other fee VAT is to be deducted at 15% in the given license, registration or permit. VAT is also to be collected on connection fees of water, gas, electricity, telephone or any other connection and no rebate can be obtained or it can not be adjusted as “input tax”.

Banks or other financial institutions involved in payment process shall deduct VAT at applicable rates incase of service import from outside Bangladesh and service is taken in Bangladesh.

VDS incase of Procurement Provider: There are misconceptions regarding VDS incase of service from procurement provider. Definition of Procurement provider is “Procurement provider means such a person or organization who supplies any goods or render any service through quotation or tender or any other way in exchange of money to any Government, Semi-Government, Autonomous bodies, Non Government Organization (NGO), Bank, Insurance or any other financial institutions, Limited Companies or Educational Institutions.” Here “any other way” means purchase is made either in cash or other manner. Alternatively the buyer shall deposit the VAT from his own fund to the Government treasury. Here “supply any goods or render any service” means goods which is supplied or service which is rendered whether it is subject to VAT or not. Therefore, VAT is to be deducted or collected in all cases.

The only exception is if goods purchased from any manufacturer/business person supported by “Mushak-11” challan or any other document as “Mushak-11” challan, and/or purchased goods from any organization registered under turnover tax or cottage industry followed by membership number embedded cash-memo, they will not be considered as procurement provider and no deduction is applicable here.

More explanations coming. Till then happy reading....

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