VAT ON TRADE LICENCE : Muhith asks NBR to review legal aspects as FBCCI raises questions [ Tritiyo Matra News ]

VAT ON TRADE LICENCE : Muhith asks NBR to review legal aspects as FBCCI raises questions

Local March 01, 2016

Finance minister AMA Muhith has asked the National Board of Revenue to review the legal aspects of imposition of value-added tax on trade licence as the Federation of Bangladesh Chambers of Commerce and Industry raised question in this regard.
Officials of the revenue board said that finance minister on February 21 instructed the NBR to look into the matter whether the VAT should be imposed on trade licence fees or not.
‘The issue should be reviewed whether imposition of VAT on trade licence fees would be right,’ Muhith wrote on the letter of the FBCCI that was written to him on February 13.
The finance ministry forwarded the letter to the revenue board to take next steps.
The NBR since 2010 has been demanding 15-per cent VAT on fees on trade licence, import and export registration certificates, land registration, passport, environment licence and some other similar services provided by the government agencies.
Earlier, the VAT wing of the NBR rejected a plea made by the FBCCI, Local Government Division and other trade bodies for abolishing value-added tax on trade licence fees.
The NBR officials said that they would now prepare a situation paper for the minister describing the legal aspects on the matter.
They said that according to the existing VAT act and rules there was no problem in imposing VAT on fees collected by the government bodies against any licences, registration and permits if those facilitate creation of any facility.
The imposition of 15-per cent VAT on trade licence and other registration fees is legally correct and consistent with the VAT act and VAT rules, the officials added.
In the letter to the finance minister, the FBCCI again demanded abolition of the VAT saying that imposition of such tax in the areas was a clear violation of the VAT act and rules.
The apex trade body argued that trade licence, registration and similar services are administrative activities of the government entities where VAT should not be applicable.
According to the article 6 (4KaKa) of the VAT Act-1991, government, semi-government and local bodies of the government can deduct VAT against making payment to the service providers for receiving any service.
There is no scope of deducting VAT on fees which they receive for awarding trade licence and other registrations as in this case the organisations are service providers, not service receivers, the FBCCI said.
But the revenue board imposed the VAT rules under article 18 (Uma), it added.
On the other hand, VAT officials said that according to the article 18 (Uma) VAT would be applicable on fees for licences which create opportunity for doing business.
Trade licence creates opportunity for doing business for licence holders and it is considered as creation of a facility, they said.
It will create multiple problems if the government withdraws VAT on licence fees as the NBR has been collecting such VAT from many sectors, the officials added.
The existing law and rules do not permit the revenue board to withdraw the
VAT on fees the agencies receive against providing licences and permits, they said.