NBR rejects FBCCI plea for no-VAT on trade licence fees

The National Board of Revenue has rejected a plea made by the Federation of Bangladesh Chambers of Commerce and Industry for abolishing value-added tax on trade licence fees.
In a letter to the NBR chairman on November 14, the FBCCI, the country’s apex trade body, demanded scrapping of the VAT saying that there was no scope for imposing VAT on trade licence and other registration fees within the existing VAT Act-1991 and VAT Rules-1991.
The VAT wing of the NBR last week rejected the arguments made by the FBCCI and said that 15 per cent VAT would be applicable to trade licence and other registration fees as the imposition of 15 per cent VAT on trade licence
and other registration fees was legally correct and consistent with the VAT act and VAT rules.
The FBCCI argued that the existing law mandates the government, autonomous and local government organisations to collect VAT at source while receiving services from service providing agencies and these organisations are not empowered to collect VAT at source for providing services.
These bodies are not also engaged in any commercial activities, it said.
City corporations, municipalities and other licensing bodies are treated as service providing agencies not service receiving agencies as they provides licences to businesses, it said.
So, the revenue board should scrap the provision as deduction of VAT at source by the bodies is directly violation of the existing law, FBCCI argued.
In its letter to the FBCCI, the revenue board said that as per the sub-clause 3 of the article 3 of the VAT rules these agencies are responsible to deduct VAT while providing services to any individual or entities.
Trade licence creates opportunity for doing business for licence holders and it is considered as creation of a facility, NBR said.
The revenue board also sought continued cooperation from the FBCCI in collecting VAT from the sector.
Earlier in late December, the revenue board also refused another plea made by the Local Government Division for waiving VAT on trade licence fees.
Officials of the NBR said that the existing law and rules did not permit the revenue board to withdraw the VAT on fees the agencies receive against providing licences and permits.

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