On the legal framework of VAT

However, some changes made by the new Act are problematic. Determination of Fair Market Value instead of price declaration and taking of rebate are the issues that will create complexities. Tax refund to foreign tourists is a good addition, whereas VAT on e-commerce and capital of SEC listed Companies (specially for multinationals) are bad additions. Some changes of the new Act are very technical. Multiplicity of VAT rates is a big loophole of the new Act. 5%, 7.5%, 10% and 15% slabs will create complications in VAT administration. The businesses will try to prove them under one slab, whereas the VAT officials will try to prove them under another slab, resulting in huge anomaly.

Clarifications regarding offences relating to revenue matters and their punishments is a very vital issue, as wrong determination of offences and non-compliances are the main causes of backlog of millions of revenue cases. The term ‘evasion’ should be defined and considered as ‘offence’. Mere ‘non-compliance’ or ‘irregularities’ should not be considered as ‘evasion’, therefore not punishable like offence. There should have a causal link among the offence and its intention. Imposition of levy at a high rate as well as penalty in mere non-compliance would result in injustice and will give rise to increasing litigation and obstruct a huge amount of government revenue.

Therefore, it is recommended that the terms ‘offences’, ‘punishments’, ‘irregularities’, ‘non-compliance’ should be more clarified through SROs. Furthermore, at least five benches should be formed in the High Court for hearing of the cases in revenue issues. Lastly, it is recommended that Alternate Dispute Resolution (ADR) mechanisms should be activated.

THE WRITER IS REGIONAL REPRESENTATIVE FROM BANGLADESH AT INTERNATIONAL CHAMBER OF COMMERCE YOUNG ARBITRATORS’ FORUM.