Value Addition

Tax(VAT)

Chapt
er

LEARNING OBJECTIVES
After studying this chapter you should be able to:
Conceptual Frame work.
Describe the basic principles of accounting.
Basic assumptions that underlie the financial accounting structure.
Primary objective of financial reporting.
"Qualitative characteristics of accounting information.
Distinction between comparability and consistency.
Describe the two major constraints inherent in the presentation of accounting information.
Two primary qualities of useful accounting information.
Basic elements of financial statements.
Benefit of conceptual framework for financial reporting.
Distinguish between historical cost and current cost.

Some Definitions: In this Act, unless there is anything repugnant in the subject or
context(a) exempted means goods and services exempt from payment of Value Added Tax
under this Act;
(b) output tax means Value Added Tax imposed under this Act;
(c) inputs means,

(i) except labor, land, building, office equipment and transport, all types of raw
materials, laboratory reagent, laboratory equipment, laboratory accessories any gas,
anything used as fuel, packaging materials, service, machinery and spare parts;
(ii) in the case of trading, goods imported, purchased, acquired or otherwise procured
in any way for sale, exchange or transfer in any other manner;
(d) input tax means Value Added Tax paid on inputs imported by registered person
or purchased by him from any other registered person and includes Value Added Tax
realized in advance at import stage on imported raw-materials;
(dd) deleted.
(ddd) tax means Value Added Tax or Vale Added Tax and Supplementary Duty, as
the case may be, payable for supply of goods or services and shall include Value
Added Tax and Supplementary Duty, import duty, excise duty and all other duties and
taxes (except Advance Income Tax) paid on inputs in the cases described in Section
13.
(e) tax period means a period of one month or such period as the government may fix
for this purpose by notification in the official gazette;
(f) taxable goods means goods not included in the First Schedule;
(g) taxable services means any service not included in the Second Schedule;
(h) Commissioner means any Commissioner of Value Added Tax appointed under
section 20;
(i) Current Account means an account maintained in prescribed form by a registered
person with the Commissioner in which all accounts of sale, purchase, treasury
deposit, Value Added Tax payable and creditable and where applicable other taxes are
recorded;
(j) Challanpatra (Invoice) means Challans provided under section 32.
(jj) deleted.
(jjj) Chief Commissioner means any Chief Commissioner, Value Added Tax
appointed under section 20 who will perform same functions and apply same powers
as conferred upon the Commissioner under this Act.
(k) Turnover means money received or receivable in total by any person in a certain
period for the supply of taxable goods produced or manufactured by him or for
rendering taxable services by him;
(1) Schedule means any Schedule annexed to this Act;
(m) Documents mean anything expressed or stated with the help of a letter, number,

symbol or sign on paper or any other material, and shall include any kind of electronic
data, computer program, computer tape, computer disk or any kind of media that holds
or store any data;
(n) Return means a return required to be submitted under section 35 of this Act;
(o) Specified Date means(i) in the case of payment of Value Added Tax, or as the case may be, in the case of
payment of Value Added Tax and Supplementary Duty, the time for payment of tax
under section 6; and
(ai) in case of submission of return, the time to submit Value Added Tax return specified by
Rules;
(oo) Consideration means money in total or value measurable in terms of money,
received or receivable against the supply of goods or rendering of services;
(p) Goods means all kinds of movable property, excluding shares, stocks, coins,
securities and recoverable claims;
(q) Producer or Manufacturer shall include any person engaged in any of the
following activities, namely:
(i) transforming or reshaping of any substance by processing individullay or in
combination with any other substance, material or components of production to
changing, transforming or reshaping it into a different specific substance or goods so
that it becomes useable differently or specifically;
(ii) any incidental or related processes required to complete the production of goods;
(iii) printing, publication, lithography or engraving processes;
(iv) assembling, mixing, cutting, liquidifying, bottling, packaging or repackaging;
(v) the work of a trustee or liquidator, executor or superintendent in case of any
bankrupt manufacturer or producer and work of any such person who disposes off the
assets of such manufacturer or producer in his capacity as an entrusted person;
(j) manufacturing or producing of any goods in exchange of money in his own
plant, machinery or equipment using raw material or inputs owned by others;
(qq) Commercial importer means a person who imports goods, other than those
specified in the First Schedule, and sells or transfers it in exchange of consideration to
any other person without changing its shape, nature, characteristics or quality;
(qqq) Commercial Document means books of accounts, files, documents or papers
maintained by a person to record his commercial transaction showing financial

condition of his business, including documents, namely:- debit voucher, credit

voucher, cash memo, daily purchase and sale records, cash book, journal book, bank
account and the documents related thereto, trial balance, ledger, financial statements
and notes, profit and loss account, profit and loss appropriation account, bank
reconciliation accounts, balance sheet and audit report and any other related document;
(qqqq) Trader means a person who sells or otherwise transfers to any other person
in exchange of consideration any goods imported, purchased or otherwise acquired by
him withoutchanging its shape, nature, characteristics or quality;
(qqqqq) Divisional Officer means Value Added Tax officer in charge of a Value
Added Tax Divisional Office or an officer not below the rank of Assistant
Commissioner assigned to discharge any function of Divisional Office of the Large
Taxpayers Unit of Value Added Tax;
(r) Rule means any rule framed under this Act;
(rrr) Bill of Entry means a bill of entry as defined in section 2(c) of the Customs
Act, 1969 (IV of 1969);
(rrrr) Bill of Export means a bill of export as defined in section 2(d) of the Customs
Act, 1969 (IV of 1969);
(s) Board means the National Board of Revenue constituted under the National
Board of Revenue Order, 1972 (P.O. No. 76 of 1972);

Question: 9. 1. Describe history of VAT in Bangladesh.

Answer: Value Added Tax (VAT) a percentage-wise tax on the value added to a
commodity or service as each constituent stage of its production and distribution is
completed. VAT may be classified in three ways: (i) on the basis of coverage of stages throughout the production and distribution stages, or confined to limited stages manufacturing plus wholesale, or wholesale plus retail; (ii) on the basis of the method
of calculation - tax credit method, subtraction method, and addition method; and (iii)
on the basis of tax treatment of final-product capital goods such as machinery,
equipment, and supplies - the consumption form, the income form, and the product
variety. Thus the three broad types of VAT are the gross national product (GNP) type,
income type and consumption type. A consumption type VAT is an indirect tax. An
income type or a GNP type VAT might be considered as a direct tax but a commodity
tax cannot be considered so. Consumption type VAT is also considered as an
alternative form of 'sales tax'.

In April 1979, the Taxation Enquiry Commission (TEC) officially took up the issue of
introducing VAT in Bangladesh as an alternate to sales tax. Until 1982, sales tax was
being collected under the Sales Tax Act 1951, which was replaced by the Sales Tax
Ordinance 1982 with effect from 1 July 1982. The World Bank played the pioneering
role in introduction of VAT in Bangladesh. A World Bank Mission visited Bangladesh
for preparing an agenda for tax reform in Bangladesh in December 1986. The mission
submitted its final report on 15 October 1989. The report recommended the
introduction of a manufacturing-cum-import stage VAT at a single standard rate within
three years. Thereafter, a Bangladesh Tax Mission visited India, Indonesia, the
Philippines and Thailand during 13 November - 04 December 1989. The Mission
submitted its report in January 1990. The government discussed the issues relating to
introduction of VAT with all related private and public agencies including the various
leading Chambers of Commerce and Industry from time to time. The government
prepared the Value Added Tax Act 1990 (Draft) in June 1990.
Final version of the Value Added Tax Act was promulgated 31 May 1991 as a
Presidential Ordinance with eight sections (relating to registration under VAT system
and the appointment and powers of VAT authorities). It was made effective from 2 June
1991. The Value Added Tax Bill 1991 was introduced in the Parliament on 1 July 1991
and the Parliament passed it on 9 July 1991. With the Presidential assent to the bill on
the next day it came into effect as The Value Added Tax Act 1991.

Question: 9. 2. Define VAT with example.

Answer: VAT is a tax, which is charged on the 'increase in value' of goods and
services at each stage of production and circulation. It is levied on the added value that
results from each exchange. It is also chargeable on the value of all imported goods. It
differs from .a sales tax because a sales tax is levied on the total value of the exchange.
VAT is a simplified and transparent system of tax in which tax is levied on the value
additions, at each stage in the production-distribution with provision of set-off of tax
paid on earlier stage.
i) The Oxford Dictionary of Current English: Value Added Tax means "a tax on the
amount by which the value of an article has been increased at each stage of its
production".

ii) D. K. Stout: Value added tax 'is a multiple tax imposed at a flat rate upon the annual
sales proceeds of a company less all its purchases from other business (i. e., excluding
direct imports).
iii) B. H. Bhatia: "VAT is a tax not on the total value of the goods being sold, but only
on the value added to it by the last seller. The seller, therefore, is liable to pay a tax not
on its gross value, but on net value, that is the gross value minus the value of inputs".
iv) Canadian Royal Commission on Taxation (CRCT): 'A tax. on value-added might
best be described as a sophisticated turnover tax, where the cumulative tax factor is
removed by taxing each transaction only in respect of the addition to sale value which
has occurred in the stage immediately prior to the transaction in question'.

Question: 9. 3. Explain the characteristics of VAT.

Answer:
1. VAT is a form of indirect taxation.
2. VAT is a broad-based tax as it covers the value added to each commodity by a firm
during all stages of production and distribution.
3. VAT is based on value added principle. Value added can be obtained either by adding
payments to factors of production or deducting cost of inputs from sales revenue.
4. VAT is a substitute for sales tax, hotel tax. Contract tax and entertainment tax.
5. VAT is based on self-assessment system and provides the facility of tax credit and
tax refund,
6. VAT avoids cascading effect existed in sales tax and contains catch-up effect.
In a nutshell, VAT is an indirect tax that is imposed on different goods and services on
the basis of value added amount in different stages of production and distribution. It is
not a genuinely new form of taxation but merely a sales tax administered in different
form. Although it is borne by the final consumer, VAT is collected at each stage of
production and distribution chain.

Question: 9.4. Discuss about the advantages and disadvantages or

argument for and arguments against VAT.
Answer:
Advantages or Argument for VAT: The main advantages which have been
identified in connection with the Value Added Tax are as follows:

1. One of the best reasons for instituting a value-added tax is that the system
encourages personal savings and investmentprincipal elements of a healthy economy
by taxing only consumption.
2. VAT has more revenue potential than other alternative indirect taxes.
3. 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.
4. 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 firms instead of being
concentrated on particular groups, such as wholesalers or retailers.
5. 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 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.
6. 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.
7. 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.
8. It is more equitable and transparent.
9. The VAT is primarily a tax on consumption. While consumption does ultimately
fund production, it's not a direct antecedent of consumption. Such a tax would
privilege saving and investment over consumption.
10. Replacing income taxation would allow more people to save and invest more
money on their own volition.

Disadvantages or Argument against of VAT: The main disadvantages which

have been identified in connection with the Value Added Tax are as follows:
1. The "value added tax" has been criticized as the burden of it relies on personal endconsumers of products and is therefore a regressive tax (the poor pay more, in
comparison, than the rich).
2. Revenues from a value added tax are frequently lower than expected because they
are difficult and costly to administer and collect.

3. 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.
4. 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.
5. Certain industries (small-scale services, for example) tend to have more VAT
avoidance, particularly where cash transactions predominate, and VAT may be
criticized for encouraging this.
6. The VAT burdens the poorest and least influential sections of society more than other
forms of tax. As the poor have lower incomes, more of their income is consumed by
consumption. The higher the prices of consumption goods, the less money that the poor
can save, and the less able they are to improve their conditions.
7. The VAT, like all taxes, is coercive. It violates the principle of private property.
8. Replacing the income tax with a VAT or hybrid system is just shifting around
incentives and disincentives in an arbitrary fashion.

Question:9.5.What are the important features of VAT in Bangladesh?

Answer:
SOME IMPORTANT FEATURES OF VAT IN BANGLADESH
The main features of VAT in Bangladesh are as follows:
1. VAT is imposed on goods and services at import stage, manufacturing,
wholesale and retails levels;
2. A single stage VAT is applicable for both imports cum manufacturing.
3. A uniform rate of 15 per cent is applicable for both goods & services.
4. VAT is compulsory for whole sellers / retailers (for selected items).
5.VAT is applicable for all items (except some of the unprocessed agricultural
products) &. forty six listed services.
6. Exports are zero rated.
7. VAT is payable at the time of supply of goods and services.
8. Turnover tax @ 3 per cent is leviable where turnover amount is less than Tk. 70 lac.
9. Some industries like Agro-based, Cottage industries are exempt from VAT.
10.Tax paid on inputs is creditable against output tax.

11.Tax returns are to be submitted on monthly or quarterly or half yearly basis as

notified by the Government.
12.Luxurious and socially undesirable goods are subject to supplementary duties at
different rates ranging from 10 per cent to 500 per cent.

Question: 9.6. Explain the types of VAT.

Answer: According to the provisions of the Value Added Tax Act, 1991, three
different types of taxes are charged:
1. Value Added Tax: Importers, manufacturers and service providers, having minimum
annual turnover of Tk. 60 lac, have to pay 15% tax on their value addition under
Section 3 of the VAT Act.
2. Turnover Tax: Turnover tax @ 3 per cent is leviable on those persons and
organizations whose turnover amount is not more than Tk. 70 lac under Section 8 and
Section 4 of the VAT Act and the VAT Rules respectively.
3. Supplementary Duty: Luxurious, non essential and socially undesirable goods are
subject to supplementary duties at different rates ranging from 10 per cent to 500 per
cent under Section 7 of the VAT Act.

Question:9.7.Discuss the goods and services chargeable under VAT

act.
Answer:
GOODS AND SERVICES CHARGEABLE UNDER THE VALUE ADDED TAX
ACT [SECTION 3(1)]
According to the Section 3(1) of the Value Added Tax Act, 1991, 15% VAT is imposed
on following goods and services:
(a) All goods imported in Bangladesh and supplied, except those stated in the First
Schedule of the VAT Act;
(b) All services provided or imported in Bangladesh, except those stated in the Second
Schedule of the VAT Act;
Notwithstanding contained in Section 3(1), zero rate tax shall be imposed on following
goods and services:
(a) any goods or services exported or deemed to have been exported from Bangladesh;
(b) food and other things supplied in accordance with section 24 of the Customs Act,
1969 to any transport leaving Bangladesh, for consumption in the transport outside
Bangladesh.

Provided that provisions of zero rate tax shall not be applicable in the following cases,
namely:(a)any goods intended to be re-imported into Bangladesh;
(b)such goods as have been presented for export in accordance with section 131 of the
Customs Act but not exported, within thirty days of submission of the bill of export or
extended time, if any, allowed by the Commissioner.

Question: 9.6. Who will pay VAT?

Answer:
According to Section 3(3) of the Value Added Tax Act, 1991, value added tax shall be
paid by:
(a) in the case of imported goods, the importer of the goods imported at import stage;
(b)in the case of goods manufactured or produced in Bangladesh, the supplier at
production or manufacture stage;
(c) in the case of service, the provider of service;
(d) In the case of service providing from outside the territory of Bangladesh, Service
receiver; and
(e) in other cases, the supplier and the receiver of service.

Question: 9.10. Explain the time and mode of payment of VAT.

Answer:
Time of payment of VAT
(1) Value Added Tax on imported goods shall be paid at the same time and in the same
manner as import duty is paid in accordance with the provisions of the Customs Act
and the rules made thereunder, as if it were an import duty under that Act, and in order
to control any matter related to the Value Added Tax or as the case may be,
Supplementary Duty, the said Act, and the rules, orders or instructions made or issued
thereunder shall, subject to the rules, orders or instructions if any, made or issued under
this Act, apply, so far as practicable, to Value Added Tax or, as the case may be,
Supplementary Duty in the manner they apply to import duty.
(2) Value Added Tax on goods manufactured or produced for carrying out or for
expansion of business or on goods imported, purchased, acquired or procured in any
manner by a registered or worth of being registered person shall be payable at the time
of the first occurrence of any of the following activities
(a) when the goods are delivered or supplied;

(b) when an invoice relating to the supply of the goods is issued;

(c) when goods are used for personal purpose or supplied for the use of others;
(d) when payment is received either in full or in part.
(3) Value Added Tax shall be payable when a taxable service is rendered by a
registered or worth of being registered person during the operation or expansion of his
business at the time of the first occurrence of any of the following activities
(a) When the service is rendered;
(b) when Challanpattra (invoice) related to the service is issued;
(c) when part or full payment is received;
(d) In case of the service is received from beyond the geographical boundary of
Bangladesh, when payment is made in part or in full.
Mode of payment of VAT
Notwithstanding anything contained in this section, the Board may, in accordance with
the procedures set by Rules, make provisions for advance payment or source
deduction, including fixation of the time and procedure for payment, of Value Added
Tax, or, as the case may be Supplementary Duty, on any goods or class of goods or
services.
(4a) Notwithstanding anything contained in sub-section (4), the Board may in order to
collect Value Added Tax or, as the case may be, Value Added Tax and Supplementary
Duty applicable to any goods or class of goods, direct, by notification in the official
Gazette, with effect from the date specified in the notification, on the body of the
package or container or holder of the goods to affix stamp or banderol or special sign
or mark of particular size and design manifesting measures of security with specific
value and determine all procedures relating to the use, distribution, preservation,
supervision, observation, accounting and packaging of such stamp or banderol or
special sign or mark.
Explanation: In this sub-section, stamp or banderol shall mean security instrument
containing specific color, design, measurement with security measure as specified by
the Board.
(4aa) Notwithstanding any other provisions of this section, Value Added Tax payable
by any service rendering person selected in this behalf by the Government, by
notification in the official Gazette, from time to time, shall be collected or deducted at
source, in the procedure specified by Boards order, at the time when the person
receiving the service or, as the case may be, the person making payment of the value of

the service or commission makes such payment and shall be deposited in the
Government treasury:
Provided that in a case where, the Value Added Tax payable by any service provider
under any foreign aided project, has been collected or deducted and deposited to
Government treasury at the time of payment of service value or commission by a
person receiving service or, as the case may be by the person paying the service value
or commission and if that service provider appoints any sub-contractor, agent or any
other service rendering person, in such case Value Added Tax shall not be collected at
source again from such sub-contractor, agent or any other service rendering person
appointed by the main service provider, subject to production or submission of
documentary evidence of collection or deduction of Value Added Tax and the deposit
of the same in the Government treasury.
(4aaa) In case of the service is received by any government, semi-government or
autonomous organization, NGO, bank, insurance organization or any other financial
institution, limited company, educational institution and as the case may be, by any
other office or organization; the Board may by an Order ascertain the list of such
service providers with citing services codes there off for the purpose of collecting
Value Added Tax at source, deduction and depositing to the government treasury by the
recipient of the services.
(4b) The person collecting or deducting Value Added Tax at source in accordance with
sub-section (4aa) shall issue, in respect of such collection or deduction, a certificate to
the person who renders the service, in accordance with the procedure set by rules in
this behalf, which shall include the following information, namely:(a) registration number of the Value Added Tax payer;
(b) total value or commission paid for the service provided;
(c) amount of value or commission on which Value Added Tax is assessed;
(d) amount of Value Added Tax collected or deducted;
(e) any other necessary information.
(4c) As per the provisions of sub-section (4) of section 5 of this Act, the at source
deducting authority will deduct the payable Value Added Tax at source from the service
provider on the basis of the fixed rates as ascertained by notification in the official
Gazette in case of receiving services.
(4d) Both at source deducting authority and goods or service provider together will
remain responsible for the amount of VAT to be deducted at source.

(4f) When VAT payable is paid at source partially by the supplier of goods or services
against any supply he will not be absolved from paying the rest amount of VAT.
(4e) Notwithstanding having the obligation of collection of Value Added Tax at source,
deduction and deposit as per sub-section (4aa), if the person paying service value or
commission under the above sub-section fails to collect Value Added Tax, deduction
and deposit then,
(a) the above Value Added Tax, service value or commission will be worth of being
realized from such person with two percent rate of monthly interest and that will be
realized in such a manner as if he is a registered person under sub-section (4aa);
(b) The Value Added Tax collected at source, deducted and deposited under sub-section
(4aa) as per the provisions of this Act can be cited as the tax paid by the concerned
service provider in the return as per section 35 with condition of the prevalence of the
certification given by the concerned registered person.
(5) Tax has to be paid in the following cases, as per the provisions of the Rules, viz:
(a) at import stage, with import duty;
(b) at production stage and as the case may be trading stage, through Current Account
and return; and
(c) In case of the supply of other goods and services, through return.
(6) The Board can lay down provisions by order for payment of tax by service receiver
for any specific service.

Question: 9.11. What is registration of VAT? Discuss the rules

regarding the VAT. (Page: Shil-704)
Answer:
Definition: VAT Registration is the process of listing with the government as a
company eligible for the return of VAT.
Rules regarding the VAT:
(1) A supplier of taxable goods or provider of taxable service or an importer or an
exporter of any goods or exporter of services shall have to be registered with the
concerned Officer in accordance with the procedure prescribed by Rules.
(2) If any person supplies such goods or provides such service or carries on importexport trade from two or more places, he shall have to be registered separately for each
place:
Provided that if any person conducts his import or export business or production,

supply of taxable goods or rendering of service from two or more places, and keeps all
records together, then, he on his own discretion will be able to be registered centrally
as per procedures prescribed by Rules.
(3) If the concerned officer is satisfied that the application for registration is in order in
all respects, he shall register the applicant and shall give him a Registration Certificate
mentioning thereon, his Business Identification Number.
(3a) Notwithstanding anything contained in order provisions of this section, the period
of validity of registration certificate given under sub-section (3) may, in the case of any
specified class of supplier or importers of taxable goods or provider of taxable service,
be determined by rules, and such registration certificate may be renewed after the
expiry of such period in accordance with the terms and procedure specified in the
Rules.
(4) If a person required to register does not apply and when the concerned officer is
satisfied upon proper inquiry about the persons obligation for registration under this
Act, he will then register the person and inform him accordingly and the registration
shall be treated as registered with effect from the date on which the registration
becomes obligatory.
Notwithstanding anything contained in sub-section (1), (2), (3) and (4), every
registered person may be provided with a unified registration number for Value Added
Tax and Income Tax. Provided that the Board may, ascertain the time and procedure.

Question:9.12.Explain the procedure of registration for VAT.

Answer:
Procedure of Registration for Value Added Tax [Rule 9 & 11]: According to Rule 9 and
11 of the VAT Rules, 1991, the procedures to registration for VAT are:
1.If the annual turnover of the supplier of taxable goods or taxable service is not more
than taka seventy lacs, he shall have to submit an application directly or through online
for registration in Form 'Musak-6' to a Divisional officer or to an officer, not being
below the rank of Assistant Commissioner specified by an order by the Board in this
behalf [Rule 9(1)].
2.If the turnover of any person exempted from registration under Section 16, exceeds
Tk. 70 lacs "during the continuous period of twelve months, in that case concerned
person shall apply for registration to the above authority within thirty days of the
expiry of such period [Rule 9(2)].

3.A person who intends to start the business of supplying taxable goods or rendering
taxable service shall, before starting the business, apply to the concerned authority, if
the annual turnover of the business is estimated to be at least taka 70 lakhs [Rule 9(3)].
4. Where more than one taxable goods or service are supplied or rendered or import or
exports are made from the same place of manufacture or rendering of service or import
or export, only one registration shall be required [Rule 9(4)].
5. A person required to be registered shall, along with the application for registration
submitted in Form Musak-7 a declaration containing particulars c f premises, plant,
capital machineries and fittings and goods to be produced or purchased and sold or
stocked and major inputs thereof [Rule 9(5)].
6. A person who imports or exports any goods shall apply for registration under subrule (1) to the divisional office or to such officer of value added tax not below the rank
of Assistant Commissioner, as may be specified by order by the Board in this behalf
[Rule 9(6)].
If the application for registration is considered to be acceptable by the concerned
officer, he shall issue a registration certificate to the applicant in Form "Musak-8"
within two working days of the receipt of the application. Moreover, for providing
untrue information in the application he may also cancel the registration under the
provision of Section 19 of the Act after giving the person reasonable opportunity of
being heard [Rule 11).

Question: 9.12. Procedure of exemption of VAT.

Answer:
(1) The Government may, by general or special order, exempt any person or class of
persons from the requirement of registration under section 15, on the basis of the
received or receivable annual turnover of taxable goods or rendering of services.
Provided that the exemption under this section shall be applicable only in the case of a
person or class of persons whose amount of annual turnover as received does not
exceed the amount ascertained, from to time by Government by notification.
(2) The Board may, by general or special order, exempt any class of importers or
exporters from the requirement of registration.

Question: 9.12. How the VAT registration may cancel in Bangladesh?

Answer:
(1) A registered person ceasing to supply of taxable goods or providing of taxable

services or import of taxable goods or export of any goods or services shall inform the
concerned Officer within 14 days of such cessation and, if the concerned Officer is
satisfied that the person has no unsettled liability to pay Value Added Tax or,
Supplementary Duty, as the case may be, he shall, on a date fixed by him, cancel the
registration of such person in accordance with the procedures set by Rules.
Provided that in the light of proviso to Sub-section (2) of section 15 if the registration
is given by a Divisional Officer by order of the Board, the concerned Commissioner
shall, before cancellation of registration, send a report with recommendation for
cancellation of registration along with all information to the Board and the Board,
having heard the concerned organization decides for cancellation, the concerned officer
shall take steps for cancellation of registration.
(1a) If the concerned Officer is satisfied on investigation that the registered person has
obtained the registration by furnishing untrue information, he may, after giving him
reasonable opportunity of being heard, cancel the registration of the person upon
settlement of his liability if any, relating to Value Added Tax and, as the case may be,
Supplementary Duty.
(2) If the annual turnover of a registered person becomes less than the amount fixed by
the Government under section 16 and the concerned officer is satisfied that the person
is no longer required to remain registered under section 15, the concerned officer may,
on the date fixed by him, cancel his registration in accordance with the procedure set
by Rule.
(3) If the registration of a person is cancelled and if there is any tax or duty drawback or
any other balance in the Current Account is due to him on the date of such cancellation,
he shall be entitled to get refund of such balance or other balance as per the procedure
set by rules, but the condition of claiming refund within six months as contained in the
proviso to sub-section (1) of section 67 shall not apply in this case.
(4) Following cancellation of registration or enlistment under this Section, if the concerned
officer is convinced that there lies any arrear to that person; then arrear and other
payables will be realized from that person in the manner that he is a registered or
enlisted person under this Act.

Question: 9.12. What is VAT authority?

Answer: For the execution of this Act and the rules made there under, the Board may,

by notification in the official Gazette appoint, in relation to any area mentioned in the
notification, any person as.

Question: 9.13. Describe the powers and functions of NBR regarding

administrative authorities.
Answer:

Question: 9.14. Describe the powers and functions of commissioner of

VAT.
Answer:
Powers & Functions of the Commissioner, Value Added Tax:
(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 additional and joint commissioners.
(iv) 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)].
(v) 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]
(vi) 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]
(vii) He may himself or order his subordinates to audit the tax and tax related activities
of a registered or registerable institution on the basis of relevant rules and to submit the
report within specified period [Section 26A]

(viii)For fulfilling guidelines regarding the use of 'stamp' or 'banderol' as per Section
6(4A) of this Act, Commissioner may 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],
(ix) He has the adjudication power to seize forfeitable goods and impose penalty where
value of goods or taxable service exceeds Tk. 15 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].
(x) He has the power to supply attested Photostat copy of documents regarding VAT
subject to certain conditions [Section 34A]

Question: 9.15. Describe the powers and functions of deputy

commissioner of VAT.
Answer:
Powers & Functions of the Deputy Commissioner, VAT:
(i)

To exercise the powers conferred upon him by or under VAT A:

perform the duty assigned to him. He may also exercise all pov 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 collectior -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
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. 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].

Question: 9.16. Describe the powers and functions of commissioner of

appellate tribunal of VAT.
Answer:
Powers and Functions of the Appellate Tribunal:
Some important powers and
functions of the Appellate Tribunal are as follows:
(i) According to the Section 196C of the Customs Act, 1969, the powers and functions
of the Appellate Tribunal may be exercised and discharged by Benches constituted by
the President from amongst the members thereof.
(ii) Subject to some special cases, a Bench shall consist of one technical member and
one judicial member.
(iii) The Appellate Tribunal may, after giving the parties to the appeal, an opportunity
of being heard, pass such orders thereon as it thinks fit, confirming, modifying or
annulling the decision or order made earlier.
(iv) The order of the Appellate Tribunal is considered as to be the final order.
(v) The Appellate Tribunal has power to regulate its own procedure and the procedure
of the Benches thereof in all matters arising out of the exercise of its powers or of the
discharge of its functions, including the places at which the Benches shall hold their
sittings.
(vi) The Appellate Tribunal may, at any time within four years from the date of the
order, with a view to rectifying any mistake apparent from the record, amend any order
passed by it and shall make such amendments if the mistake is brought to its notice by
the concerned officer or the other party to the appeal.
(vii) The Appellate Tribunal shall, for the purposes of discharging its functions, have
the same powers as are vested in a court under the Code of Civil Procedure, 1908 (Act
V of 1908), when trying a suit in respect of the following matters, namely(a) discovery and inspection;
(b) enforcing the attendance of any person and examining him on oath;
(c) compelling the production of books of account and other documents;
(d) issuing commissions.

LEARNING OBJECTIVES
After studying this chapter you should be able to:
Conceptual Frame work.
Describe the basic principles of accounting.
Basic assumptions that underlie the financial accounting structure.
Primary objective of financial reporting.
"Qualitative characteristics of accounting information.
Distinction between comparability and consistency.
Describe the two major constraints inherent in the presentation of accounting information.
Two primary qualities of useful accounting information.
Basic elements of financial statements.
Benefit of conceptual framework for financial reporting.
Distinguish between historical cost and current cost.

Customs Act

Chapt
er

10

Some Definitions
In this Act, unless the context otherwise requires3[(1) "adjudicating authority" means any authority competent to pass any order or
decision under this Act, but does not include the Board, Commissioner (Appeals) or
Appellate Tribunal;
(1A) "aircraft" has the same meaning as in the Aircraft Act, 1934 (22 of 1934);
(1B) "Appellate Tribunal" means the Customs, Excise and Gold (Control)
Appellate Tribunal constituted under section 129;]
(2) "assessment" includes provisional assessment, reassessment and any order of

assessment in which the duty assessed is nil;

(3) "baggage" includes unaccompanied baggage but does not include motor vehicles;
(4) "bill of entry" means a bill of entry referred to in section 46;
(5) "bill of export" means a bill of export referred to in section 50;
(6) "Board" means the 4[Central Board of Excise and Customs constituted
under the Central Boards of Revenue Act, 1963 (54 of 1963)];
(7) "coastal goods" means goods, other than imported goods, transported in a
vessel from one port in India to another;
5[(7A) "Commissioner (Appeals) "means a person appointed to be a Commissioner of
Customs (Appeals) under sub-section (1) of section 4;]
(g) "Commissioner of Customs" , except for the purposes of Chapter XV, includes an
Additional Commissioner of Customs;
(h) "conveyance" includes a vessel, an aircraft and a vehicle;
(i) "customs airport" means any airport appointed under clause (a) of
section 7 to be a customs airport;
(j) "customs area" means the area of a customs station and includes any area in
which imported goods or export goods are ordinarily kept before clearance by
customs authorities;
(k) "customs port" means any port appointed under clause (a) of section 7 to be a customs
port 6[and includes a place appointed under clause (aa) of that section to be an inland
container depot];
(l) "customs station" means any customs port, customs airport or land customs
station;
(m)"dutiable goods" means any goods which are chargeable to duty and on which
duty has not been paid:
(n) "duty" means a duty of customs leviable under this Act;
(o) "entry" in relation to goods means an entry made in a bill of entry, shipping
bill or bill of export and includes in the case of goods imported or to be
exported by post, the entry referred to in section 82 or the entry made under
the regulations made under section 84;
(p) "examination", in relation to any goods, includes measurement and weighment
thereof;
(q) "export", with its grammatical variations and cognate expressions, means
taking out of India to a place outside India;

(r) "export goods" .means any goods which are to be taken out of India to a
place outside India;
(s) "exporter", in relation to any goods at any time between their entry for export
and the time when they are exported, includes any owner or any person holding
himself out to be the exporter;
(t) "foreign-going vessel or aircraft" means any vessel or aircraft for the time
being engaged in the carriage of goods or passengers between any port or
airport in India and any port or airport
outside India, whether touching any intermediate port or airport in India or not, and
includes(p) any naval vessel of a foreign government taking part in any naval exercises;
(q) any vessel engaged in fishing or any other operations outside the territorial waters of
India;
(r) any vessel or aircraft proceeding to a place outside India for any purpose
whatsoever;
7[(21A) "Fund" means the Consumer Welfare Fund established under section 12C of
the Central Excises and Salt Act, 1944 (1 of 1944);]
(22) "goods" includes(a) vessels, aircraft and vehicles;
(b) stores;
(c) baggage;
(d) currency and negotiable instruments; and
(e) any other kind of movable property;
(23) "import ", with its grammatical variations and cognate expressions, means
bringing into India from a place outside India;

(24)

"import manifest" or "import report" means the manifest or report

required to be delivered under section 30;

(25)

"imported goods" means any goods brought into India from a place

outside India but does not include goods which have been cleared for home
consumption;
(26)

"importer", in relation to any goods at any time between their importation and the

time when they are cleared for home consumption, includes any owner or any person
holding himself out to be the importer;
(27)

"India" includes the territorial waters of India;

(28)

"Indian customs waters " means the 8[waters extending into the sea up

to the limit of contiguous zone of India under section 5 of the Territorial

Waters, Continental Shelf, Exclusive
Economic Zone and other Maritime Zones Act, 1976 (80 of 1976)] and includes any
bay, gulf, harbour, creek, or tidal river;
(29)

"land customs station" means any place appointed under clause (b) of

section 7 to be a land customs station;

(30)

"market price", in relation to any goods, means the wholesale price

of the goods in the ordinary course of trade in India;

(31)

"person-in-charge" means-

(r) in relation to a vessel, the master of the vessel;

(s) in relation to an aircraft, the commander or pilot-in-charge of the aircraft;
(t) in relation to a railway train, the conductor, guard or other person having the
chief direction of the train;
(u) in relation to any other conveyance, the driver or other person-in-charge of the
conveyance; (32) "prescribed" means prescribed by regulations made under this
Act;
(33) "prohibited goods" means any goods the import or export of which is subject to
any prohibition under this Act or any other law for the time being in force but does

not include any such goods in respect of which the conditions subject to which the
goods are permitted to be imported or exported have been complied with;
(34) "proper officer", in relation to any functions to be performed under this Act,
means the officer of customs who is assigned those functions by the Board or the
5[Commissioner of Customs;]
(35)

"regulations" means the regulations made by the Board under any provision of

this Act;
(36)

"rules" means the rules made by the Central Government under any provision of

this Act;
(37)

"shipping bill" means a shipping bill referred to in section 50;

(38)

"stores" means goods for use in a vessel or aircraft and includes fuel and

spare parts and other articles of equipment, whether or not for immediate fitting;
(39)

"smuggling", in relation to any goods, means any act or omission

which will render such goods liable to confiscation under section 111 or
section 113;
(40)

"tariff value", in relation to any goods, means the tariff value fixed in

respect thereof under sub-section (2) of section 14;

(41)

"value", means relation to any goods, means the value thereof

determined in accordance with the provisions of sub-section (1) of section 14;

(42)

"vehicle" means conveyance of any kind used on land and includes a railway

vehicle;
(43)

"warehouse" means a public warehouse appointed under section 57 or

private ware house licensed under section 58;

(44)

"warehoused goods" means goods deposited in a warehouse;

(45)

"warehousing station "means a place declared as a warehousing station under

section 9.

Question: 10.1. Define customs and customs duty.

Answer:
Customs is an authority or agency in a country responsible for collecting tariffs and for
controlling the flow of goods, including animals, transports, personal effects, and
hazardous items, into and out of a country.
Customs Duty is a tariff or tax imposed on goods when transported across international
borders. The purpose of Customs Duty is to protect each country's economy, residents,
jobs, environment, etc., by controlling the flow of goods, especially restrictive and
prohibited goods, into and out of the country

Question: 10.2. What are the objectives of customs act in Bangladesh?

Answer: The customs duty is levied, primarily, for the following purpose:
1. Restricting Imports for conserving foreign exchange.
2. Protecting Indian Industry from undue competition.
3. Prohibiting imports and exports of goods for achieving the policy objectives of
the Government.
4. Regulating exports.
5. Prevent Smuggling.

6. Facilitate implementation of laws relating to Foreign Trade Act, Foreign

Exchange Regulation Act, Conservation of Foreign Exchange, Prevention of
Smuggling Act, etc.

Question: 10.3. Explain the procedure of customs act in Bangladesh.

Answer:
The Customs Act is related to import and export of "goods". The goods are brought into
or taken out of Bangladesh under the provision of the Customs Act. The "conveyance"
entering Bangladesh from any place outside Bangladesh with imported goods must land
at a "customs-area" which is usually a "customs-station" and which includes other area
where imported goods or goods for export are ordinarily kept by the customs authorities.
The "person-in-charge" of the conveyance is liable to comply this provision u/s 42. The
customs-station may be a "customs-port", "customs-airport" or any "land customsstation". For control purposes, no vessel whether laden or in ballast, shall depart from any
customs-port without a port clearance granted by the appropriate customs ofriccr u and
no c
other than a vessel shall depart from a land customs-station or custor.'r
written permission granted by the appropriate customs officer u s :_ :
are usually not to be loaded or unloaded or waterborne except in the p
"appropriate officer". And usually goods are also not be loaded or unloaded
certain days or at certain times u/s 65 and they are not be loaded or unloaded (
approved places u/s 66, but u/s 67, the National Board of Revenue (N'BR) m=
the provisions of section 64 and 66. For imposing customs duty, the customs av,::
the duty u/s 80 and 81.

ut a

23.5 SCOPE OF BANGLADESH CUSTOMS LAW

Question: 10.4. What are the types of customs authorities?

Answer:
Question: 10.5. What are the prohibited goods under customs act 1969
in Bangladesh?
Answer: No goods specified in the following clauses shall be brought into or taken out
of Bangladesgh, namely:(a) counterfeit coins, forged or counterfeit currency notes, and any other counterfeit
product;
(b) any obscene book, pamphlet, paper, drawing, painting, representation,
figure, photograph, film, or, article, video or audio recording, CDs or
recording on any other media;
(c) goods having applied thereto a counterfeit trade mark within the meaning
of the Pakistan Penal Code, 1860 (Act XLV of 1860), or a false trade
description within the meaning of the Copyright Ordinance, 1962 (XXXIV
of 1962), the Registered Layout-Designs of Integrated Circuits Ordinance,
2000 (XLIX of 2000), the Registered Designs Ordinance, 2000 (XLV of
2000), the Patents Ordinance, 2000 (LXI of 2000), and the Trade Marks
Ordinance, 2001 (XIX of 2001), or goods imported or exported in
contravention of the provisions of section 32;
(d) goods made or produced outside Pakistan and having applied thereto any
name or trade mark, being or purporting to be the name or trade mark of
any manufacturer, dealer or trader in Pakistan, unless,(i) the name or trade mark is, as to every application thereof,
accompanied by a definite indication of the goods having been

made or produced in a place outside Pakistan; and

(ii) the country in which that place is situated is in that indication
shown in letters as large and conspicuous as any letter in the name
or trade mark, and in the same language and character as the name
or trade mark;
(e) goods involving infringement of copyright, layout-design of integrated
circuits, industrial designs, patents within the meaning of the Copyright
Ordinance, 1962 (XXXIV of 1962), the Registered Designs Ordinance,
2000 (XLV of 2000), and the Patents Ordinance, 2000 (LXI of 2000),
respectively; and goods made or produced outside Pakistan and intended
for sale, and having applied thereto, design in which copyright exists
under the Copyright Ordinacne, 1962 (XXXIV of 1962), the Registered
Layout- Designs of Integrated Circuits Ordinance, 2000 (XLIX of 2000),
the Registered Designs Ordinance, 2000 (XLV of 2000), the Patents
Ordinance, 2000 (LXI of 2000), and the Trade Marks Ordinance, 2001
(XIX of 2001), in respect of the class to which the goods belong or any
fraudulent or obvious imitation of such design, patent, copyright except
when the application of such design has been made with the licence or
written consent of the registered proprietor, right holdeer of the design,
patent or copyright, as the case maya be.

Question: 10.6. Discuss the goods levied under customs act 1969.
Answer:
(1) Except as hereinafter provided, customs duties shall be levied at such rates as are
prescribed in the First Schedule or under any other law for the time being in force on,(a)

goods imported into Pakistan;

(b)

goods brought from any foreign country to any customs station,

and without payment of duty there, transshipped or transported for, or thence carried to,

and imported at any other customs-station; and

(c)

Goods brought in bond from one customs station to another.

(2) No export duty shall be levied on the goods exported from Pakistan.
(3) The Federal Government may, by notification in the official Gazette, levy,
subject to such conditions, limitations or restrictions as it may deem fit to
impose, a regulatory duty on all or any of the goods imported or exported,
as specified in the First Schedule at a rate not exceeding one hundred per
cent of the value of such goods as determined under section 25.

(4)

The regulatory duty levied under sub-section (3) shall

(a)

be in addition to any duty imposed under sub-section (1) or under

any other law for the time being in force; and

(b)

be leviable on and from the day specified in the notification issued

under that sub-section, notwithstanding the fact that the issue of the official Gazette in
which such notification appears is published at any time after that day.

Question: 10.7. Discuss the various types of duties under the custom act
1969.
Answer: The following are the types of customs act:
1. Basic Customs Duty: All goods imported into India are chargeable to a duty under
Customs Act, 1962. The rates of this duty, popularly known as basic customs duty, are
indicated in the First Schedule of the Customs Tariff Act, 1975.
2. Additional (Countervailing) Duty: This countervailing duty is leviable as additional
duty on goods imported into the country and the rate structure of this duty is equal to the
excise duty on like articles produced in India.
3. Export Duties: Under Customs Act, 1962, goods exported from India are chargeable
to export duty. The items on which export duty is chargeable and the rate at which the

duty is levied are given in the customs tariff act, 1975. However, the Government has
emergency powers to change the duty rates and levy fresh export duty depending on the
circumstances.
4. Protective Duties: Tariff Commission has been established under Tariff Commission
Act, 1951. If the Tariff Commission recommends and Central Government is satisfied
that immediate action is necessary to protect interests of Indian industry, protective
customs duty at the rate recommended may be imposed under section 6 of Customs Tariff
Act. The protective duty will be valid till the date prescribed in the notification.
5. Countervailing Duty on Subsidized goods: If a country pays any subsidy (directly or
indirectly) to its exporters for exporting goods to India, Central Government can impose
Countervailing duty up to the amount of such subsidy under section 9 of Customs Tariff
Act.
6. Anti Dumping Duty on dumped articles: Large manufacturers from abroad may
export goods at very low prices compared to prices in their domestic market. Such
dumping may be with the intention to cripple domestic industry or to dispose of their
excess stock. In order to avoid such dumping, Central Government can impose, antidumping duty up to the margin of dumping on such articles.
7. Safeguard Duty: Central Government is empowered to impose 'safeguard duty' on
specified imported goods if Central Government is satisfied that the goods are being
imported in large quantities and under such conditions that they are causing or
threatening to cause serious injury to domestic industry. Such duty is permissible under
WTO agreement. Safeguard duty is to provide need-based protection to domestic industry
for a limited period, with the objective of restoring free and fair competition.

8. National Calamity Contingent Duty: A National Calamity Contingent Duty (NCCD)

of customs is imposed under section 129 of Finance Act, 2001.
9. Education cess on customs duty: The Education Cess of 2% and Secondary & Higher
Education Cess of 1% of the aggregate duty of customs excluding safeguard duty,
countervailing duty, Anti Dumping Duty is applicable w.e.f. 01.03.2007.

Question: 10.8. What are exemptions from customs duty in Bangladesh?

Answer:

Question: 10.9. Define travel Tax and Excise duty.

Answer:
Travel Tax: Travel Tax is costs associated with traveling for the purpose of conducting
business-related activities. Travel expenses can generally be deducted by employees as
non-reimbursed travel expenses that are incurred while traveling away from home
specifically for business purposes, such as for a conference or meeting. While many
travel expenses can be deducted, those that are lavish or extravagant in nature, or those
that are for personal purposes, are excluded. The Internal Revenue Service (IRS)
considers employees to be traveling away from home if their business obligations require
them to be away from their "tax home" (the general area where the their main place of
business is located) for a period longer than a typical work day.

Excise duty: An excise or excise tax (sometimes called a special excise duty) is an
inland tax on the sale, or production for sale, of specific goods or a tax on a good
produced for sale, or sold, within a country or licenses for specific activities