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Executive Summery

Value Added Tax is one of the most important sources of tax revenues in Bangladesh.

Since its introduction in 1991, VAT is one of the most effective and efficient tools in

resource mobilization. According to section 20 of the Value Added Tax, 1991, the Board

appoints certain officials for the purpose of effective application of the VAT law and

rules. These officials as a whole are known as Value Added Tax Authorities. VAT

authorities may be classified into two major groups depending on their functions and

powers namely administrative authorities & Judicial Authorities.

These two authorities with office bearers are depicted in the following chart in order of

their respective power, authorities and responsibilities.

National Board of Revenue (NBR) an organ of the Ministry of Finance. NBR was

constituted in 1972 under the National Board of Revenue Order 1972, which repealed and

replaced the Central Board of Revenue Act 1924. It lies at the apex of the whole revenue

organization of the government and is responsible for the administration of almost all the

direct and indirect taxes.

The main direct taxes are the income tax, wealth tax (collected as a surcharge of income

tax since assessment year 1999-2000) and gift tax, while the indirect taxes are the

customs duty, excise duty, VALUEADDEDTAX (VAT), turnover tax, supplementary duty

and infrastructure development surcharge. The Commissioner, Value Added Tax is

appointed by the National Board of Revenue.

The term Collector has been renamed by the term Commissioner through the

Finance Act 1995. He is responsible to exercise the authority conferred on him by the

VAT Act 1991 also can exercise full authority while controlling the sub-ordinates within

his jurisdiction and territory. Director General, Central Intelligence Cell, he is appointed

by the NBR and carries out functions like inspection, investigation of VAT related cases

involving leakage of revenue or evasion of value added tax. Commissioner Value Added

Tax. Commissioner, Large Taxpayer Unit, DG, Central Intelligence Cell, DG, Audit

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Intelligence and Investigation-VAT, DG, Duty Exemption and Drawback Office Joint

Commissioner or Director, VAT, Assistant Commissioner or Assistant Director, VAT,

Superintendent, VAT, Inspector, VAT.VAT Officer Additional Commissioner or

Additional DG,

VAT Customs wing is primarily responsible for collection of all duties and taxes at the

import stage. Apart from collection of government revenue it is also responsible for trade

facilitation, enforcement of government regulations, protection of society and

environmental protection, preparation of foreign trade statistics, trade compliance and

protection of cultural heritage.

Customs collects 42% of the NBRs total revenue. The revenue target for the year 2007-

08 was Tk. 17,812 Cr. and actual revenue collection so far (July 07 to May08) is Tk. 16,

987.06 Cr. that is 19.04% higher than the previous year. The target has been revised to

Tk. 19385 Cr. for 2007-08 and with an increase of 16.25%; it has been set to Tk. 22,536

Cr. for the year 2008-09.

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Introduction

Value Added Tax is one of the most important sources of tax revenues in Bangladesh.

Since its introduction in 1991, VAT is one of the most effective and efficient tools in

resource mobilization. Value Added Tax has emerged as a principal instrument of taxing

domestic consumption world wide during last four decades. It is now in operation in

more than 130 Countries. Value added tax is a primary source of tax revenue in many

European and other developed countries. Its importance is also increasing in the

developing countries because of its effectiveness in mobilizing local resources. VAT

proves to be an efficient tool for revenue collection; its performance, therefore, has direct

impact on fiscal mobilization, macroeconomic stability, and development. The basic

advantages of Value Added Tax can be stated as its neutrality, tranparency, certainty and

self policing mechanism.

Objective of the Study

Intention to achieve extensive knowledge about Value Added Tax and Customs.

To familiar with the VAT and Customs Authority.

To understand the Organogram of VAT and Customs Administration.

To study what performance are done by whom in the VAT and Customs

Administration.

To understand the foreign exchange operations of islami bank Bangladesh limited

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To highlight the responsibilities of different

Methodology

A. Sources of Data: The report is prepared by using both primary and secondary

data.

i) Primary Sources: A lots of the required information came from primary

sources. These sources are -

o Practical desk work

o Relevant file study as provided by the concerned officer

o In depth study of selected cases.

o Maintaining diary.

ii) Secondary sources: Conceptual parts of the report have been collected by

studying different literatures regarding credit appraisal system. Some of these

secondary sources are:

Different Circulars issued by the VAT and Customs Authority.

Different manuals published by National Board of Revenue.

From the website of National Board of Revenue.

Newspaper information on several days.

Tax Reports.

Relevant books, Newspapers and Journals.

B. Analysis of Data: Some arithmetic and graphical tools are used in this report for

analyzing the collected data and to classifying those to interpret them clearly.

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Limitations of the study

The study does not cover practical example because of confidentiality the

VAT and Customs did not provide actual information..

It is very difficult to analyze this issue without proper knowledge about

VAT and Customs Administration.

As it is not conventional so it bears some complexity to understand.

Some words are in legal terms that make it difficult.

It is time consuming to differentiate & understand interest & profit.

The study could not cover the sufficient data due to time constraint

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About Tax

Classification of Tax System:

1. Single Taxes:

Only one tax for everybody. Single tax is the poll tax or the head tax or adolescent tax,

which is imposed on a person simply because he is there in the society.

2. Multiple Taxes:

A system under which different types of taxes are believed by the govt. according to

suitability. Ex. Income Tax, VAT.

Classification of Tax systems

Multiple Taxes Single Tax

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Types of Taxation:

1. Direct TaxDirect tax is a sort of tax the impact of effect incidents and which fallback on the person

on whom it is imposed. i.e.: Income Tax, Marriage Tax etc.

2. Indirect Taxes

Indirect Taxes are those burden of which can be passed on others through price vehicles.

3. Progressive Taxes

The tax rate increases as the taxable income/amount increases.

4. Regressive Taxes

The opposite of a progressive tax is a regressive tax where the tax rate decreases as the

taxable income/amount increases.

Taxation

Direct Taxes

Indirect Taxes

Progressive Taxes

Regressive Taxes

Proportional Taxes

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Europe and Latin America, it has become a pivotal component of the tax systems of both

developing and transition economies.

Definition

Value Added Tax (VAT) or goods and services tax (GST) is tax on exchanges. It is

levied on the added value that results from each exchange. It differs from the sales tax

because a sales tax is levied on the total value of the exchange.

Features of VAT in Bangladesh:

(i) VAT is imposed on goods and services at import stage, manufacturing, wholesale and

retails levels;

(ii) A uniform VAT rate of 15 percent is applicable for both goods and services;

(iii) 15 percent VAT is applicable for all business or industrial units with an annual

turnover of Taka 2 million and above;

(iv) Turnover tax at the rate of 4 percent is livable where annual turnover is less than

Taka 2 million;

(v) VAT is applicable to all domestic products and services with some exemptions;

(vi) VAT is payable at the time of supply of goods and services;

(vii) Tax paid on inputs is creditable/adjustable against output tax;

(viii) Export is exempt;

(ix) Cottage industries (defined as a unit with an annual turnover of less than Taka 2

million and with a capital machinery valued up to Taka 3,00,000) are exempt from VAT;

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(x) Tax returns are to be submitted on monthly or quarterly or half yearly basis as

notified by the Government.

(xi) Supplementary Duty (SD) is imposed at local and import stage under the VAT Act,

1991. Existing statutory SD rates are as follows:

(a) On goods: 20%, 35%, 65%, 100%, 250% & 350%

(b) On services: 10%, 15% & 35%.

Value Added Tax Authorities

According to section 20 of the Value Added Tax, 1991, the Board appoints certain

officials for the purpose of effective application of the VAT law and rules. These officials

as a whole are known as Value Added Tax Authorities.

Types of Vat Authorities:

VAT authorities may be classified into two major groups depending on their functions

and powers namely

1. Administrative authorities: To look after the total administration of VAT wing

starting from identification of assesses to the collection of VAT, TT and SD from

the assesses. They are also responsible to maintain an effective coordination in

administration, management and control among various VAT offices throughout

the country.

2. Judicial Authorities: To hear the claims of the assesses and settle the claims

through providing verdict as early as possible.

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These two authorities with office bearers are depicted in the following chart in order of

their respective power, authorities and responsibilities.

Administrative Authorities:

National Board of Revenue

National Board of Revenue (NBR) an organ of the Ministry of Finance. NBR was

constituted in 1972 under the National Board of Revenue Order 1972, which repealed andreplaced the Central Board of Revenue Act 1924. It lies at the apex of the whole revenue

organization of the government and is responsible for the administration of almost all the

direct and indirect taxes. The main direct taxes are the income tax, wealth tax (collected

as a surcharge of income tax since assessment year 1999-2000) and gift tax, while the

indirect taxes are the customs duty, excise duty, VALUEADDEDTAX (VAT), turnover tax,

supplementary duty and infrastructure development surcharge. Estimates for the period

between 1990-2000 showed that on average, the NBR is responsible for collection of

about 93% of total tax revenue and about 81% of the total revenue of the government in a

year. The taxes collected by organs other than the NBR are narcotics duty, land revenue,

sale of non-judicial stamp, registration and motor vehicles tax. In addition to collection of

taxes, NBR plays a key role in formulation and implementation of the FISCALPOLICYof

the government.

Power and Functions of NBR are:

a. Collecting direct and indirect taxes;

b. Formulating and dealing with policy matters including continuous re-appraisal of

tax policies and tax laws;

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c. Controlling and supervising direct and indirect tax administration;

d. Helping in formulating tax policy and processing legislation, preparing tax

revenue budget, negotiating agreements relating to tax, donations, debts and

general cooperation with foreign governments and international agencies, and also

vetting tax clauses of agreements with foreign governments, agencies or

institutions;

e. Performing all the functions and exercising the powers vested in the government

by various tax laws, such as disposing of revision application under the customs,

excise and VAT laws, and dealing with exemptions from various taxes; and

f. Helping in preventing smuggling, implementing import and export policies, and

formulating policies for domestic 12ndustrialization or encouraging FOREIGN

DIRECTINVESTMENT.

Commissioner, Value Added Tax:

The Commissioner, Value Added Tax is appointed by the National Board of Revenue.

The term Collector has been renamed by the term Commissioner through the Finance

Act 1995. He is responsible to exercise the authority conferred on him by the VAT Act

1991 also can exercise full authority while controlling the sub-ordinateswithin his

jurisdiction and territory.

Power and Functions of the Commissioner of Value Added Tax:

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a. To exercise the power conferred upon him by or under VAT Act and to perform

the duty assigned to him [Section 21 (1)].

b. To exercise the activities relating to the determination and collection of VAT, SD

and TT, as the case may be.

c. He will administer and control the affair of additional and joint commissioners.

d. He may assign any of his subordinates to exercise the power of a commissioner in

the whole or any specified area of his jurisdiction [Section 22(2)].

e. He has the power to issue summons to any person in writing mentioning the

reason thereof for witnessing and submitting of any document and other material

[Section 25].

f. He has the right to enter the place and premises of production, rendering of

service and trading to inspect stock of goods, services and inputs and to examine

accounts and records, if necessary [Section 26].

g. He may himself or order his subordinates to audit the tax and tax related activities

of a registered or register-able institution on the basis of relevant rules and to

submit the report within specified period [Section 26A]

h. For fulfilling guidelines regarding the use of stamp or banderol as per Section

6(4A) of this Act, Commissioner may be appoint one or more VAT officer and

give them necessary directives for observation and surveillance in the place of

production, supply, rendering of service or trading of a registered person and for

ensuring supervised supply [Section 26B].

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He is also appointed by NBR and responsible to administer the duties relating to import

duty exemption and drawback related matters associated to value added tax.

Additional Commissioner of Additional Director General, VAT :

They are appointed by the NBR and works under the direct supervision of NBR. They

may control and assign duties to their subordinates like Joint Commissioners or Deputy

Commissioners or other VAT officials to exercise certain powers imposed on them. He

may also exercise other functions as may be assigned to him by the Board.

Joint Commissioner of Director, VAT:

The term Joint Collector has been replaced by the term Joint Commissioner or

Director through the Finance Act, 1995. They are appointed by the NBR and works

under the direct supervision of the Commissioner or Additional Commissioner.

Value Added Tax Authority

Administrative Judicial

National Board of Revenue Appellate Tribunal

Commissioner (Appeal),

VAT

1. Commissioner Value

Added Tax

2. Commissioner, Large

Taxpayer Unit

3. DG, Central

Intelligence Cell

4. DG, Audit Intelligence

and Investigation-VAT

5. DG, Duty Exemption

and Drawback Office

6. Additional

Commissioner or

Additional DG, VAT

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control and assign duties of the Deputy Commissioner and other VAT officers below his

rank.

1. Joint Commissioner or

Director, VAT

2. Deputy Commissioneror Deputy Director,

VAT

3. Assistant Commissioner

or Assistant Director,

VAT

4. Superintendent, VAT

5. Inspector, VAT

6. VAT Officer

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Deputy Commissioner or Deputy Director, VAT :

The term Deputy Collector has been replaced by he term Deputy Commissioner or

Deputy Director through the Finance Act, 1995. They are appointed by the NBR and

works under the direct supervision of the Commissioner, Additional Commissioner or

Joint Commissioner. He may control and assign duties of the Assistant Commissioner

and other VAT officers below his rank.

Power & Functions of the Deputy Commissioner, VAT:

i. To exercise the powers conferred upon him by or under VAT Act and to

perform the duty assigned to him. He may also exercise all powers

conferred upon and perform all duties assigned to any of his subordinates

[Section 21 (1)].

ii. To exercise the activities relating to the determination and collecttion of

VAT, SD and TT, as the case may be.

iii. He will administer and control the affairs of the assistant commissioners.

iv. He has the power to issue summons to any person in writing mentioning

the reason there of for witnessing or submitting of any cocument or other

material [Section 25].

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v. He has the right to enter place and premises of production, rendering of

service, and trading to inspect stock of goods, service and inputs and to

examine accounts and records, if necessary [Section 26].

vi. He has the adjudication power to seize forfeitable goods and impose

penalty where value of goods or taxable service is not more than Tk. 5

lacs. But in both cases he has to serve show cause notice to the owner of

the seized goods within prescribed periods [Section 27 & 40].

Assistant Commissioner, Value Added Tax:

The term Assistant Collector has been replaced by the term Assistant Commissionerthrough the Finance Act, 1995. They are appointed by the NBR and generally work under

the supervision of the Joint commissioner or Deputy Commissioner. They help the

Deputy Commissioner in exercising powers related to VAT activities.

Superintendent , VAT :

They are also appointed by the NBR and generally work under the suppervision of

assistant commissioner, VAT. They are mainly engaged in activities like VAT

assessment, recovery and other relevant activities in a local VAT office or circle.

Power & Functions of the Superintendent, VAT:

i. To exercise the powers conferred upon him by or under VAT Act and to

perform the duty assigned to him. He may also exercise all powers

conferred upon and perform all duties assigned to any of his subordinates

[Section 21 (1)].

ii. To exercise the activities relating to the determination and collection of

VAT, SD and TT, as the case may be.

iii. He will administer and control the affairs of the VAT Inspectors and other

officers below that rank.

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iv. He has the power to issue summons to any person in writing mentioning

the reason thereof for witnessing or submitting of any document or other

material [Section 25].

v. He has the right to enter place and premises of production, rendering of

service, and trading to inspect stock of goods, service and inputs and to

examine accounts and records, if necessary [Section 26].

vi. He has the adjudication power to seize forfeitable goods and impose

penalty where value of goods or taxable service is not more than Tk. 1 lac.

But in both cases he has to serve show cause notice to the owner of the

seized goods within prescribed periods [Section 27 & 470].

Inspector , VAT :

The position Inspector, VAT has been introduced through the Finance Act, 2003. They

are appointed by the NBR and helps the Deputy Commissioner, Assistant Commissioner

and the Superintendent in exercising powers and functions as a subordinate officer. As a

subordinate officer under the Superintendent, they also work to search for new taxpayers

through investigation and to widen the VAT net.

VAT Officer with any other Designation :

They are also appointed by the NBR and generally work under the supervision of the

Assistant commissioner, VAT.

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Customs

Background

Customs wing is primarily responsible for collection of all duties and taxes at the import

stage. Apart from collection of government revenue it is also responsible for trade




Customs collects 42% of the NBRs total revenue. The revenue target for the year 2007-

08 was Tk. 17,812 Cr. and actual revenue collection so far (July 07 to May08) is Tk. 16,

987.06 Cr. that is 19.04% higher than the previous year. The target has been revised to

Tk. 19385 Cr. for 2007-08 and with an increase of 16.25%; it has been set to Tk. 22,536

Cr. for the year 2008-09.

Customs Administration

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Name and Designation of Custom and VAT Authorities:

List of Commissioner & DG

(Customs and VAT Wing)

S/N

Name Designation

01 Hussain Ahmed President

Customs, Excise & VAT

Appellate Tribunal, Dhaka.

02 Mr. Prokash Dewan Director General


Training Academy, Chittagong03 Syed Golam Kibria Commissioner (Import)

Customs House, Chittagong

04 Md. Jamal Hossain Commissioner (Export)

Customs House, Chittagong

05 Md. Firoz Shah Alam Customs, Excise & VAT

Commissionerate, Chittagong

06 Md. Masud Sadik Commissioner

Customs House, Dhaka07 Md. Abdul Kafi Commissioner


Commissionerate Dhaka

(South), Dhaka.

08 Md. Enayet Hossain Commissioner


Commissionerate Dhaka

(North), Dhaka.

09 Md. Maruful Islam Commissioner

Customs Bond

Commissionerate, Dhaka.

10 Md. Lutfor Rahman Commissioner


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Commissionerate, Rajshahi.

11 Md. Hafizur Rahman Commissioner


Commissionerate, Jessore.

12 Md. Abdul Mannan

Sikder

Commissioner

Customs House, Benapole.13 Md. Hafizur Rahman Commissioner


Commissionerate, Khulna.

14 Md. Saiful Islam Commissioner

Customs, Excise & VATCommissionerate, Sylhet.

15 Sultan Md. Iqbal Director General

Customs Intelligence &

Investigation Directorate, Dhaka.

16 Md. Shahriar Mollah Director General

VAT Audit, Intelligence and

Investigation Directorate, Dhaka.17 Md. Nasir Uddin Director General

Duty Exemption and Drawback

Office, Dhaka.18 Md. Shahabuddin

Nagori

Commissioner

Customs Valuation and Internal

Audit Commissionerate, Dhaka.

19 Md. Jahangir Hossain

Howlader

Commissioner

Large TaxPayer Unit (LTU),

VAT, Dhaka.

20 Mr. Margub Ahmed Member Customs

Excise and VAT Apellate

Tribunal, Dhaka.

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SWOT Analysis

SWOT Analysis of Value Added Tax and Customs:

SWOT Analysis is used to evaluate the Strengths, Weaknesses, Opportunities, and

Threats in a business. It is a methodology used to aid strategic planning that gained

popularity during the 80s. It involves specifying the objective of the business or project

and identifying the internal and external factors.

SWOT Analysis of VAT

Strength:

One of the best reasons for instituting a value added tax, according to VAT

proponents, is that the system encourages personal savings and investment-

principal elements of a healthy economy- by taxing only consimption. Compared with alternatives in indirect taxation, the VAT has more revenue

potential.

VAT system acts as a supplementary tax that can help make up for revenue lost

due to income tax evasion. It is generally more broad based and entails a trail of

invoices that helps improve tax compliance and enforcement.

Since VAT is carried through the retail level, it offers all the economic advantages

of a tax that includes the entire retail price within its scope, at the same time the

direct payment of the tax is spread out and over a large number of firmas instead

of being concentrated on particular groups, such as wholesalers or retailers.

One particular advantage is that of the widening of the tax base by bringing all

transactions into the tax net. Specifically, VAT gives the government the

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opportunity to bring back into the tax system all those persons and entities who

were given tax exemptions in one form or another by the previous regime.

A significant advantage of the value added form in any country is the cross audit

feature. Tax charged by one firm is reported as a deduction by the firms buying

from it. Only on the final sale to the consumer is there no possibility of cross

audit.

Vat may be selectively applied to specific goods or business entities as a control

mechanism. It may also effectively be used to protect local industries.

It is more equitable and transparent.

Weakness

The value added tax has been criticized as the burden of it relies on personal

end-consumers of products and is therefore a regressive tax (the poor pay more, in

comparison, than the rich).

Revenues from a value added tax are frequently lower than expected because they

are difficult and costly to administer and collect.

VAT increases inflation. In developing countries, some businessmen seize almost

any opportunity to raise prices, and the introduction of VAT certainly offers such

an opportunity.

It is also argued that VAT places a heavy direct impact of tax on the labor-

intensive firm compared to the capital- intensive competitor, since the ratio of

value added to selling price is greater for the former. This is a real problem for

labor-intensive economies and industries.

Certain industries (small-scale services, for example) tend to have more VAT

avoidance, particularly where cash transactions predominate, and VAT may becriticized for encouraging this.

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Opportunities

Values Added Tax Act, 1991: The Value Added Tax Act, 1991 (22 No. Act of

1991) came into force on 1st July, 1991. It has 73 sections, numerous sub-sections

and three schedules containing necessary provisions for the purpose of imposing

value assed tax.

Value Added Tax Rules, 1991 : The National Board of Revenue prepared relevant

rules under the name Value Added Tax Rules, 1991 in accordance with the

power authorized under Section 72 of Value Added Tax Act, 1991. The rules are

followed in the administration of the VAT Act.

Finance Act : To give effect to the various proposals in the annual budget

covering the areas of direct and indirect taxes, Finance Act is issued. It contains

various applicable tax rates and amendments to the Value Added Tax Act and

Rules, 1991.

SRO (Statutory Regulatory Orders): According to the Section 21 of the Value

Added Tax Act, 1991; NBR can issue certain circulars as and when necessary.

The provisions of these SROs are also to be considered at the time of imposing

VAT.

VAT Case Law: In the course of assessment proceedings, the judgments given by

the courts regarding the interpretations of any provisions of the VAT Act may

also act as guidance to the assessing officers and the assessee in similar relevant

circumstances.

Threats

VAT has been criticized as the burden of it relies on personal end-consumers of

products and is therefore a regressive tax.

People may hide there original income in case of paying income taxes.

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An argument may arise that VAT is a reason of double taxation.

Recommendation

Administrative authorities look after the total administration of VAT wing

starting from identification of assesses to the collection of VAT, TT and SD from

the assessesJudicial Authorities hear the claims of the assesses and settle the

claims through providing verdict as early as possible.

Values Added Tax Act, 1991: The Value Added Tax Act, 1991 (22 No. Act of

1991) came into force on 1st July, 1991. It has 73 sections, numerous sub-sections

and three schedules containing necessary provisions for the purpose of imposing

value assed tax.

VAT system acts as a supplementary tax that can help make up for revenue lost

due to income tax evasion. It is generally more broad based and entails a trail of

invoices that helps improve tax compliance and enforcement.

To give effect to the various proposals in the annual budget covering the areas of

direct and indirect taxes, Finance Act is issued.

VAT has been criticized as the burden of it relies on personal end-consumers of

products and is therefore a regressive tax.

Customs wing is primarily responsible for collection of all duties and taxes at the

import stage.

Customs duty has been criticized as the burden of it relies on importer.

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Conclusion

According to section 20 of the Value Added Tax, 1991, the Board appoints certain

officials for the purpose of effective application of the VAT law and rules. These officials

as a whole are known as Value Added Tax Authorities. VAT authorities may be

classified into two major groups depending on their functions and powers namely

Administrative authorities & Judicial Authorities

Administrative authorities look after the total administration of VAT wing starting from

identification of assesses to the collection of VAT, TT and SD from the assesses

Judicial Authorities hear the claims of the assesses and settle the claims through

providing verdict as early as possible.

VAT Customs wing is primarily responsible for collection of all duties and taxes at the

import stage. Apart from collection of government revenue it is also responsible for trade




Customs collects 42% of the NBRs total revenue.

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Bibliography

Value Added Tax Rule 1991.

Review Book Bangladesh Income Tax by Nikhil Chandra Shil, Mohammad

Zakaria Masud and Mohammad Faridul Alam.

Gernal by National Board of Revenue.

www.nbr-bd.org

Customs Act,1969.
http://www.nbr-bd.org/http://www.nbr-bd.org/

value added tax authorities.final

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