The National Board of Revenue (NBR) has relaxed rules regarding value-added tax (VAT) registration of manufacturing entities operating in Bangladesh, a move welcomed by the businesses as it would reduce their cost of compliance. 

From next fiscal year, companies that have one production or manufacturing unit will be able to get a central or only one registration to comply with the VAT law, said the revenue authority.

Until now, firms could sign up for only one VAT registration if they made goods in more than one unit and sold those through multiple sales centres.

However, companies that have only one manufacturing unit and one sales outlet were not allowed to get the central registration for VAT.

Instead, they had to get separate registrations for each of unit or sales centre, which would increase the cost of doing business of firms.

"We had been urging for the change in this provision for many days…this is a very progressive move," said Debabrata Roy Chowdhury, director for legal and corporate affairs and company secretary of Nestle Bangladesh.

"(It) will benefit many firms that only operate with one factory," said the official of the fully owned subsidiary of Nestlé SA, Switzerland, one of the world's largest foods and beverage companies.

"This will simplify the VAT operations, reduce cost of doing business and save our time," he added.

Bangladesh has 3.58 lakh VAT registered entities, a very small number of which are centrally registered, according to the NBR.

Snehahish Barua, partner at chartered accountancy firm Snehasish Mahmud & Co, said the NBR's latest move would make simpler the obtainment of a central registration for companies.

"Documentation and administration cost will be reduced. The number of VAT disputes will also be reduced," he said.

Also known as consumption tax, the VAT is the biggest source of revenue. It accounted for 39 per cent of the total tax of Tk 103,350 crore collected in fiscal year 2020-21.

From July till April this fiscal year, VAT and supplementary duty collection from domestic business activities grew 13 per cent year-on-year to Tk 84,916 crore.

The indirect tax collection was 37 per cent of the total Tk 2,27,756 crore tax collection logged by the NBR until April this fiscal year, according to the NBR.