Over Tk 2 trillion VAT from shops could possible to collect yearly

Mahfuja Mukul: A shop called Lady Shop in Maniknagar area of the capital transacts more than lakhs of taka per day. But the shopkeeper does not pay VAT to the government. Not only lady shops, the number of VAT evading shops in Maniknagar, Gopibagh, Tikatuli areas doing more than lakhs of taka a day is now innumerable. The same picture is in all city corporation areas of the country including Dhaka. Even in municipal areas, innumerable shops transact more than lakhs of taka a day. But the government is not getting VAT from anywhere.
Far from paying VAT, many shops do not even have VAT registration. However, the VAT Act states that VAT registration is required to start a business in City Corporation and Municipal areas. At least 15 days before the start of business, BIN should be obtained from NBR. But millions of shopkeepers or businessmen are doing crores of rupees business every day by evading VAT by showing thumbs up to this law of the government.
Several statistics have shown that 90 percent of VAT recoverable in retail and wholesale businesses is evaded. Currently, the rate of VAT on retail business is 5 percent. Only five thousand crore rupees worth of VAT is collected from retail business annually. Where it is possible to collect at least two and a half million taka every year.
On Tuesday (April 2), the World Bank said, Bangladesh has been deprived of VAT worth about two lakh crore rupees in one financial year. In the fiscal year 2018-19, the government was able to collect only Tk 85 thousand crores of VAT. That is, two-thirds less VAT was collected than the recoverable VAT that year.
There are more than 75 lakh shop owners across the country including Dhaka metropolis. If they pay an average of Tk 20,000 VAT per month, then the government gets a revenue of Tk 180,000 crore annually. If the VAT of other big shops is added to this, the amount can be doubled.
According to Bangladesh Shop Owners Association, there are six to seven lakh big shopkeepers in Dhaka among the divisional cities. Most of them have daily transactions of more than lakhs of rupees. There are more than two lakh such businessmen in Khulna, one lakh in Rajshahi, more than Tk 4 lakh in Chittagong. Apart from this, there are 40 to 50 thousand shopkeepers in the district towns. There are 1000 to 10000 in any upazila.
It is known that there are hundreds of thousands of businesses that trade between Tk 10 lakh and Tk 20 lakhs per day. But most of them do not pay VAT. But NBR’s field assistant revenue officers are busy collecting VAT from big industries.
Those concerned say, on the one hand, millions of shopkeepers are being given the opportunity to evade VAT. On the other hand, pressure has been created on a handful of institutions. Tk 1 lakh 25 thousand 424 crores have been collected in the financial year 2022-23. Of this, Tk 58,566 were received from 109 establishments, which is 47 percent of the VAT collected. The total amount of VAT collected in the financial year 2021-22 was Tk 1 lakh 300 crore. Of this, NBR collected about 53 percent from 110 large-scale institutions.
Not only that, VAT is also being collected from private universities. Apart from this, NBR is going to impose VAT on the tickets of Metrorail passengers, the most popular public transport in the capital.
In this context, the former chairman of NBR, Abdul Majid, said that usually 100 to 150 large companies pay more than half of the total target of VAT collection. But hundreds of thousands of companies are evading VAT by doing business. As the VAT target is increased, the pressure on only a few companies increases, which is suffering, he said.
Executive director of private research institute Policy Research Institute of Bangladesh (PRI) Ahsan H. Mansoor said, there are more than 2 million VAT eligible companies in the country. But VAT cannot be collected from them. Earlier, the government used to get some revenue from them under package VAT. Not getting that now.
He also said that if it is possible to ensure the VAT registration of all shopkeepers in the city, the pressure on those who pay VAT regularly would be reduced. If Electronic Fiscal Devices (EFD) were provided to all in city corporations and municipal areas, the government would get at least one lakh crore rupees more in revenue. And if it is possible to provide machines at the union or village level, it will be possible to collect twice the VAT annually.
In the budget of the current financial year, NBR’s revenue collection target was Tk 4 lakh 30 thousand crores. Out of which the target is to collect Tk 1 lakh 59 thousand 100 crores from VAT. Out of this, Tk 88,701 crores of VAT has been collected in the last eight months (July to February).
According to NBR sources, there are only eight lakh VAT registered companies in the country. Among them, 96,000 companies file regular returns online. 20,000 to 22 thousand companies file returns manually. According to that, about 59 to 60 lakh shop owners are evading VAT year after year.
It should be noted that those whose annual transaction is less than Tk 50 lakh will not have to pay VAT. In other words, it is mandatory to pay VAT only if the transaction is more than Tk 14 thousand per day. Basically, the price of the product is determined by adding VAT. Buyer pays VAT unknowingly while buying goods. But instead of depositing it in the government treasury, the shopkeeper put it in his own pocket.
Royal Village Restaurant has been doing business for a long time in ManiknagarBishwar Road area of the capital. Despite having EFD machines, this air-conditioned restaurant does not issue VAT invoices to consumers. They are openly evading VAT to the government to retain customers at relatively low prices. If the consumer asks for VAT ECR receipt voluntarily, then the restaurant collects extra money. Not only Royal Village, hundreds of such restaurants in the capital are evading revenue to the government in this way.
In 2021, a survey was conducted by the VAT Intelligence Department. According to their survey, four out of every five businesses do not have a Business Identification Number (BIN). They are doing business without registration. The VAT Intelligence Department conducted the survey in the famous 17 shops of the capital Dhaka, Narayanganj and Narsingdi. The survey revealed that 88 percent of the shops were not covered by VAT. And the VAT paid by the remaining 12 percent traders is also ‘not in accordance’ with the reality.
Incidentally, despite the initiative to set up Electronic Fiscal Device (EFD) machines to increase VAT collection at the retail level, it is not fruitful due to technical errors. In August 2019, EFD was introduced on an experimental basis in five VAT Commissionerates in Dhaka and Chittagong. Even after four years, there is no significant progress in this regard. Due to technical glitches between the VAT online scheme and the EFD machines, the installation of the machines is getting delayed. So far only 18 thousand 5 EFDs and 500 SDCs have been set up across the country.
However, to bring transparency in VAT collection, within the next five years, the aim is to install 500,000 EFD machines across the country, said Chairman of the National Board of Revenue (NBR) Abu Hena Rahmatul Munim.
NBR member Dr. Mainul Khan said, NBR is active in collecting VAT at the retail level. Another 60,000 EFD machines will be installed in Dhaka and Chittagong by next June.

President of Bangladesh Shop Owners Association Helal Uddin said, many organizations among the members of our association are not VAT eligible. Again, many eligible organizations are still not members of the Shop Owners Association. At least 2 million VAT eligible establishments in the country have the capacity to pay VAT.
But he raised the question, six years ago EFD machine was launched, why could not finish it? Shopkeepers want to get VAT registration. Everyone will pay VAT if EFD is given for accounting purposes. Then there will be no more misunderstandings.
Note that the first VAT law was introduced in the country in 1991. But as the expected discipline did not materialize, the government introduced a law in 2012 to pursue improved VAT management, which was supposed to be implemented from 2015. But in the face of strong objections from the businessmen on various aspects of that law, a new law was established by combining the VAT Act of 1991 and the VAT Act of 2012. Its implementation began in 2019, but lakhs of shopkeepers are still fearlessly evading VAT.