The VAT confusion

Despite widespread protests, Finance Minister AMA Muhith yesterday categorically said the government would not withdraw the value added tax (VAT) imposed on the private universities.

"The universities will have to pay it without increasing the tuition fees and it cannot be collected from the students," he said at a press briefing in Sylhet.

Similarly, the National Board of Revenue (NBR) said it is the private university authorities, not the students, who would pay the VAT.

"The VAT has been imposed not to be collected from the students. The VAT is included within the existing tuition fees. The responsibility of paying the VAT is solely on the university authorities, never on the students," the NBR said in a press release yesterday.

It, however, did not clarify why the government made a fresh announcement of the VAT imposition if it's already included in the tuition fees.

The government slapped 7.5 percent VAT on private universities, and medical and engineering colleges in the current budget, sparking widespread criticisms.

Revenue officials said it's usually the businesses and service providers who collect VAT from consumers. The private universities were exempted from it.

But they could not say whether the universities used to fix fees including the VAT in the past.

Contacted for clarification, NBR Member (VAT Policy) Jahangir Hossain claimed there is no ambiguity the statement. "It is the explanation of the NBR," he said, declining to comment further.

Students, however, wouldn't buy the government's argument, saying even if the universities pay the VAT, they would realise the money from the students on some pretext. So, it's the students who eventually will have to bear the brunt of the government move.

Experts too believe so.

"Ultimately, the students will have to pay the VAT. Generally, VAT is an indirect tax paid by end consumers," said Ahsan H Mansur, executive director of the Policy Research Institute.

If the NBR argues that the VAT is already included in the tuition fees, the fees shouldn't be increased now, he said. "The private university authorities should prepare their prospectus saying the tuition fees are inclusive of the VAT."

Research Fellow Towfiqul Islam Khan of the Centre for Policy Dialogue said the NBR explanation implies that the private universities will now pay the VAT from their own pockets, which will cut their revenue by 7.5 percent.

"The universities may ultimately raise the tuition fees in future (to cover the VAT expenses).

"To restrain such fee hike, the government will need to regulate and fix the fees charged by the private universities, which may not be possible in reality," he added.

Sheikh Kabir Hossain, president of the Association of Private Universities of Bangladesh, said the NBR's explanation was "confusing and incorrect".

"We are not business organisations. The private universities are non-profit institutions and run by trustee boards. We do not get any subsidy or whatsoever from the government. So why should we pay the VAT?"

All expenses including teacher's salaries are paid from the students' fees, and if the government imposes VAT, the burden will automatically fall on the students' shoulders, he told The Daily Star.

"We surely won't pay the money from our own pockets," Kabir added.

Dr Mohammed Farashuddin, chairperson of the trustee board of East West University, said, "We may pay the VAT from the existing tuition fees of the students so that their families don't face any additional financial hardship."

"We should keep in mind that many of our students come from households with limited income," added the former Bangladesh Bank governor.

Registrar of Brac University Md Sohul Afzal said they too were considering this.