Apply payable of ICT Development Surcharge for VAT adjustment
In Bangladesh, the treatment of the ICT Development Surcharge for VAT adjustment purposes is a complex issue, as the ICT Development Surcharge and Value Added Tax (VAT) are distinct levies, though both contribute to government revenue.
Here's a breakdown of how it generally applies and the challenges faced:
1.VAT: Value Added Tax (VAT) is an indirect tax that applies to the incremental value added at each step of producing and distributing goods and services. In Bangladesh, the standard VAT rate is 15%
2. Businesses that are VAT-registered can claim input tax credit for VAT paid on their purchases, which is then adjusted against the VAT they collect on their sales (output tax). This prevents cascading of taxes.
ICT Development Surcharge: This is a specific surcharge levied, often on telecommunication and internet services, with the objective of funding ICT development initiatives. It is a separate charge from VAT.
2. VAT Adjustment and Input Tax Credit:
- Input Tax Credit: In Bangladesh, the VAT system (governed by the VAT and Supplementary Duty Act, 2012) generally allows businesses to claim input tax credit for VAT paid on their purchases of goods or services. This is typically permissible when their own output supplies are subject to the standard 15% VAT rate, or are zero-rated, such as exports.
- This means if a business pays VAT on its inputs, it can deduct that amount from the VAT it owes on its outputs.
- ICT Development Surcharge and Input Tax Credit: The key issue here is whether the ICT Development Surcharge qualifies as "input tax" for VAT adjustment purposes. Typically, surcharges are not considered VAT and therefore cannot be directly adjusted as input tax credit against VAT liability. The ICT Development Surcharge is usually an additional cost on the service provided, and businesses are expected to bear it or pass it on to consumers separately from the VAT.
3. Challenges and Industry Concerns:
- Increased Costs: The imposition of the ICT Development Surcharge on top of VAT on certain ICT services can lead to increased costs for businesses and consumers.
- Industry Demands: ICT trade bodies like BASIS (Bangladesh Association of Software and Information Services) have consistently urged the government to reconsider increased VAT rates and other taxes on internet and telephone services, arguing that these measures hinder the growth of the ICT sector and impact digital transformation efforts. They often advocate for tax exemptions or more favorable tax treatment for the sector, including addressing the burden of such surcharges.
- Distinction in Tax Types: The National Board of Revenue (NBR) maintains distinct classifications for different types of taxes and surcharges. The ICT Development Surcharge is typically listed as a separate tax type (e.g., "ICT Development Surcharge (2214)" in payment portals) from VAT on domestic products and services.
In summary:
The ICT Development Surcharge is generally not eligible for VAT adjustment as input tax credit in Bangladesh. It's a separate levy for a specific purpose (ICT development). Businesses typically pay this surcharge in addition to any applicable VAT on the services they consume. The ICT sector has expressed concerns about the cumulative tax burden, including such surcharges, and has advocated for policies that support the growth of the digital economy.
For precise and up-to-date information regarding specific cases or recent changes in tax laws, To get the most accurate and current information on tax matters, you should always refer to official NBR publications or seek guidance from a qualified tax professional.