Main Features of VAT

(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 leviable 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;

(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%.

Tax Base for VAT:

Import Stage: Customs Assessable Value + Customs duty +

Supplementary Duty
Domestic/Local�� a) Goods (manufacturing): [Production cost + Profit
Stage: and�� Commission (if any) + Supplementary duty
(if any)]

b) Services: [total receipts excluding VAT but

including� supplementary duty (if any)]

Truncated Base / Fixed Value Addition: In some of the cases of goods and
services producers and sellers face difficulties in availing VAT credit/adjustment
facilities due to non availability of invoices from the sellers of input. In order to
remove this operational difficulty fixed bases such as 10%, 25%, 30%, and 60% value
addition is taken into account for calculation of VAT for a number of goods and
services. In such circumstances net VAT rate for different rates of value addition
comes to 1.5%, 2.25%, 4.5% and 9%.

VAT at the wholesale and retail stage: In case of wholesalers and retailers, there
is a special provision for a 1.5% percent VAT known as Trade VAT on the total sale,
provided that the wholesaler/retailer do not avail the facility of input
credit/adjustment. Such tax is also collected at the import stage from importers of
finished goods as an advance trade VAT.

Tariff Value for imposition of VAT: Under the VAT Law, the government is
empowered to fix Tariff Value for some items for the collection of VAT. Example: tariff
value for mild-steel products produced from imported/locally procured re-rollable
scraps is TK 4000.00 per MT. Normal VAT input credit is also not available under this
system.

Deduction of VAT at source:� As deduction at source is also practiced in case of

VAT on� certain services, Government, Semi-Government, Autonomous Bodies,
NGOs, Banks, Insurance Companies and Limited Companies are authorized by the
government to deduct applicable VAT on the services at source.

Excise Duty: At present excise duty applies to only two items: bank deposits and
domestic air ticket (Tk. 250 per journey).

Silent Features of VAT

1. Rate of Tax VAT proposes to impose two types of rate of tax mainly:
o 4% on declared goods or the goods commonly used.
o 10-12% on goods called Revenue Neutral Rates (RNR). There would be
no fall in such remaining goods.
o Two special rates will be imposed-- 1% on silver or gold and 20% on
liquor. Tax on petrol, diesel or aviation turbine fuel are proposed to be
kept out from the VAT system as they would be continued to be taxed,
as presently applicable by the CST Act.
2. Uniform Rates in the VAT system, certain commodities are exempted from
tax. The taxable commodities are listed in the respective schedule with the
rates. VAT proposes to keep these rates uniform in all the states so the goods
sold or purchased across the country would suffer the same tax rate.
Discretion has been given to the states when it comes to finalizing the RNR
along with the restrictions. This rate must not be less than 10%. This will
ensure By doing this that there will be level playing fields to avoid the trade
diversion in connection with the different states, particularly in neighbouring
states
3. No concession to new industries Tax Concessions to new industries is done
away with in the new VAT system. This was done as it creates discrepancy in
investment decision. Under the new VAT system, the tax would be fair and
equitable to all.
4. Adjustment of the tax paid on the goods purchased from the tax payable on
the goods of sale All the tax, paid on the goods purchased within the state,
would be adjusted against the tax, payable on the sale, whether within the
state or in the course of interstate. In case of export, the tax, paid on
 purchase outside India, would be refunded. In case of the branch transfer or
consignment of sale outside the state, no refund would be provided.
5. Collection of tax by seller/dealer at each stage. The seller/dealer would collect
the tax on the full price of the goods sold and shows separately in the sell
invoice issued by him
6. VAT is not cascading or additive though the tax on the goods sold is collected
at each stage, it is not cascading or additive because the net effect would be
as follows: - the tax, previously paid on the sale of goods, would be fully
adjusted. It will be like levying tax on goods, sold in the last state or at retail
stage.

Features of VAT
• Broad based: This means that the VAT is charged on a wide range of goods and
services in SVG.

• Multi-Stage: VAT is charged and collected at all levels in the economy (i.e. from
production to the final consumer).

• Transaction Tax: VAT is charged on every supply of goods and services

including:-

1.
1. Business to business
2. Business to consumers and
3. Transactions with the government

• Consumption Tax: VAT is expected to be passed on the consumers in the price

of goods and services they consume.

• Domestic Consumption: VAT is charged on the value of imports, but VAT is not
charged on value of exports.