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VAT DEDUCTION AT SOURCE M. FAKHRUL ALAM Additional Director General Customs Intelligence & Investigation VAT DEDUCTION AT SOURCE M. FAKHRUL ALAM Additional Director General Customs Intelligence & Investigation Directorate 1

Scope of deduction of VAT at source: l At source VAT deduction is fully Scope of deduction of VAT at source: l At source VAT deduction is fully reverse of or opposite to ideal VAT collection system l At source deduction is applicable when procurement or supply of specific services are made through tender, work order , written or verbal order l Deducting authority to ensure unregistered business not to participate in the supply or tender process l Participants need to submit copy of VAT registration along with tender proposal l Authenticity of any VAT registration can be verified through e-mail [[email protected] gov. bd] or phone-9358039 2

Deducting Authority: l Govt. organization l Semi-govt. organization l Autonomous body l NGO l Deducting Authority: l Govt. organization l Semi-govt. organization l Autonomous body l NGO l l Bank Insurance Company l Other Financial Institution l Limited Company l Educational Institution 3

Rate of deduction: l Truncated rate or 15% at source deduction of VAT, at Rate of deduction: l Truncated rate or 15% at source deduction of VAT, at the time of payment , is applicable on the procurement of some specific services which are listed in General order no-63/mushak/2011 dated-29/6/2011 & General order no-06/mushak/2011 dated-07/8/2011 l Truncated rate of VAT on services was determined by SRO no : 182 -law/2012/640 -mushak dated 7 th. June, 2012 l 15% VAT collection by Banks/Financial Institutions on importation of services while payment is made by the importer through Banking Channel 4

Rate of advance collection: l 4% advance collection of VAT by the Customs Houses Rate of advance collection: l 4% advance collection of VAT by the Customs Houses from commercial importers, on the base value determined by NBR, which is applicable for subsequent supply of imported goods l 15% collection to be made by govt, semi –govt, autonomous body and local authority from the receiver of the following facility: - on the fee applicable for issuance or renewal of license, registration, permit ; and -revenue sharing, royalty, commission, charge, fee or any other total receipt under the provision of such license, registration, permit l 15% collection to be made by the Concern Authority on connection fee of water, electricity, gas and telephone 5

contd/1 Services under deduction of at source: l In 2011 -12 & 12 -13 contd/1 Services under deduction of at source: l In 2011 -12 & 12 -13 financial year, 35 service sectors were brought under at source deduction. They are as follows(Ref: General order no-09/mushak/2011 dated 12/10/2011 & General order no-07/mushak/2012 dated 07/6/2012) l l l Decorators & caterers -15% Motor garage & workshop - 4. 5% Dockyard - 4. 5% Construction firm -5. 5% Advertising firm -15% Printing press -15% 6

contd/2 Services under deduction of at source: l l l l Auctioneer -15% Land contd/2 Services under deduction of at source: l l l l Auctioneer -15% Land developing firm -1. 5% Building construction firm - 1. 5% Indenting firm -15% Survey firm -15% Plant /Capital machinery hirer -15% Furniture (from manufacturer) -6% Furniture (from outlet) - 4% 7

contd/3 Services under deduction at source: l l l l Courier & Express mail contd/3 Services under deduction at source: l l l l Courier & Express mail service -15% Repair & servicing firm -15% Consultancy & supervisory firm -15% Lease holder -15% Audit & accounting firm - 15% Procurement Provider- 4% Security Services -15% Law Consultant - 15% 8

contd/4 Services under deduction at source: l l l l Transport contractor - 15% contd/4 Services under deduction at source: l l l l Transport contractor - 15% Transport of petroleum product - 2. 25% Rent A Car - 4. 5% Architect & interior designer -15% Graphic designer -15% Engineering firm -15% Sound & light instrument hirer -15% 9

contd/5 Services under deduction at source: l l l l Participants in board meeting contd/5 Services under deduction at source: l l l l Participants in board meeting -15% Satellite channel distributor -15% Chartered Biman & helicopter hirer -15% Purchaser of auctioned goods - 4% Cleaning Agency - 15% Seller of lottery ticket – 15% Organizer of program - 15% Human resource supply - 15% Important note: A service unit under truncated rate may pay 15% VAT in order to get input tax credit. 10

Obligations of Supplier while supply is made to Deducting Authority: l Issue VAT Invoice Obligations of Supplier while supply is made to Deducting Authority: l Issue VAT Invoice to the supply receiver(DA) at the rate of 15%, if the supply is made at the rate of 15% l Issue VAT Invoice at truncated rate to the supply receiver(DA) if the service is under truncated base l Amount of total VAT to be included in the VAT challan l BIN number and ref no. of tender/work order under which the supply is made to be mentioned in VAT Challan 11

Responsibilities of Deducting Authority: contd/1 l Deducting Authority to deposit the VAT deducted to Responsibilities of Deducting Authority: contd/1 l Deducting Authority to deposit the VAT deducted to its’ commissionerate code within 15 days of deduction l The VAT deducted to be deposited in the name of the Deducting Authority l The deducting authority to issue a certificate in mushak 12 -kha within 5 working days from deposition of deducted VAT 12

Responsibilities of Deducting Authority: contd/2 l Original copy of certificate, containing a serial number Responsibilities of Deducting Authority: contd/2 l Original copy of certificate, containing a serial number to be followed for every fiscal year, in ‘form mushak 12 -kha’ to be provided, along with a photocopy of treasury challan, to the supplier within 5(five) working days after the deducted VAT is deposited l The second copy of such certificate , along with the original copy of treasury challan, to be also sent to the concern VAT circle, within 5(five) working days, under which the deducting authority is registered l A taxpayer needs to show the amount of VATdeducted by him/her as deducting authority in column- 5 & 16 of VAT return 13

Responsibilities of Deducting Authority: contd/3 l A taxpayer needs to show the amount of Responsibilities of Deducting Authority: contd/3 l A taxpayer needs to show the amount of VAT deducted from him/her by a deducting authority in column-19 of VAT return l Deducting authority, if not a registered unit under VAT, to issue a certificate in mushak 12 -kha within 5 working days from deposition of deducted VAT l Certificate in mushak 12 -kha not to be issued by the Commissioner of Customs for its 4% advance collection of VAT on import stage l The deducting authority to preserve certificate in 12 -kha upto 6 years 14

Adjustment of VAT deducted at Source against one’s payable contd/1 l VAT deducted at Adjustment of VAT deducted at Source against one’s payable contd/1 l VAT deducted at source, at the rate of 15% , from a supply is adjustable by the supplier under following provisions: - VAT invoice is issued by the supplier at the rate of 15% - “mushak 12 -kha certificate’ is to be issued in favour of supplier by deducting authority - adjustment to be made in the same or subsequent tax month of the issuance of “mushak 12 -kha certificate’ - after adjusting the deducted VAT and other deductibles, if any, against one’s total payable in the same tax month, the net VAT to be paid to the treasury and to be shown in the same return l NOTE : VAT deducted at source at truncated rate can not be adjusted by the supplier 15

Adjustment of VAT deducted at Source against one’s payable contd/2 l Advance VAT collected Adjustment of VAT deducted at Source against one’s payable contd/2 l Advance VAT collected @ 4% at import stage can be adjusted in the same tax month or subsequent tax month on the basis of B/E, against his subsequent supply of the same at the rate of 15% subject to submission of tax return l VAT deducted/collected @15% on imported services can only be adjusted (in terms of input tax credit) if it is considered a creditable input under section 2 (ga) and 9 (1) l VAT on license fee, permit fee, royalty, revenue sharing etc deducted/collected by govt, semi-govt, autonomous and local authority can not be adjusted by the person from whom it is collected 16

Overall Features: l Specific list of sectors for at source VAT deduction (General order Overall Features: l Specific list of sectors for at source VAT deduction (General order no-63/mushak/2011 dated 29/6/2011 & General order no-06/mushak/2011 dated-07/8/2011) l Only 35 services have been brought under at source deduction l In case of the services brought under truncated rate, the rate of deduction , if applicable, will be the truncated rate in full l For other services (except services under truncated rate) the rate of deduction, if applicable, will be @15% 17

Excise Rate Applicable for FY: 12 -13 contd/1 Excise duty to be collected by Excise Rate Applicable for FY: 12 -13 contd/1 Excise duty to be collected by Banks and Financial Institutes by the way of maintaining any types of accounts including loan account The statutory rates of excise duty on accounts are as follows: Where the balance, whether credit or debit, does not exceed at any time during a year: -does not exceeds taka twenty thousand– nil - exceeds taka twenty thousand but does not exceed taka one lakh-Tk. 120 18

Excise Rate Applicable for FY: 11 -12 contd/2 - exceeds taka one lakh but Excise Rate Applicable for FY: 11 -12 contd/2 - exceeds taka one lakh but does not exceed taka ten lakh -Tk. 350 - exceeds taka ten lakh but does not exceed taka one crore – Tk. 1, 000 - exceeds taka one crore but does not exceed taka five crore – Tk. 5, 000 - exceeds taka five crore – Tk. 10, 000 NOTE: Account balance upto 1 lakh is exempted from excise duty if the bank A/C is opened with Tk. 10. 00 by a farmer 19

Financial Code for VAT/SD/Excise Duty l VAT on local product & services 1/0000/0311 l Financial Code for VAT/SD/Excise Duty l VAT on local product & services 1/0000/0311 l VAT on at source 1/0000/0311 l SD on local product 1/0000/0711 l SD on local service 1/0000/0721 l Excise Duty 1/0000/0601 l Turnover tax l Penalty 1/0000/0313 1/0000/1901 20

Explanation of financial Code contd/1 l In the previous slide we have seen that Explanation of financial Code contd/1 l In the previous slide we have seen that for deposition of duty/tax we are using 13 digit financial code, of which l First single digit is 1 (legal code for deposit) l First 4 digit is for customs, VAT, Appeal , Intelligence etc. l If the duty/tax is deposited to a custom house the first 4 digit number will be -1131 If the duty/tax is deposited to a VAT commissionerate the first 4 digit number will be -1133 l 21

Explanation of financial Code contd/2 l Second 4 digit is for specific custom house Explanation of financial Code contd/2 l Second 4 digit is for specific custom house or VAT commissionerate l l Dhaka custom house (0005) Ctg. custom house-import(0010) Ctg. custom house-export (0012) Benapol custom house (0007) Mongla custom house (0015) l VAT COMMISSIONERATE l Dhaka(south) (0010) Chittagong (0025) Jessore (0005) Sylhet (0018) l l Dhaka(north) (0015) Rajshahi (0020) Khulna (0001) LTU(VAT) (1145/0010) 22

Thank you 23 Thank you 23