Input Tax Credit
Goods And Services Not Eligible For Input Tax Credit
According to the available details and Bangladesh's Value Added Tax and Supplementary Duty Act, 2012, input tax credit is not allowed on the following goods and services acquired through local purchases:
1.Goods/Services Purchased from Turnover Tax Units:
Businesses that purchase goods or services from entities paying turnover tax (instead of VAT) are not eligible for input tax credit. Turnover tax is a simplified tax for businesses below a certain turnover threshold, and these businesses do not typically charge VAT.
2.Goods/Services Purchased from Unregistered Entities:
If you purchase goods or services from suppliers who are not registered under the VAT system, you cannot claim input tax credit on those purchases. Only VAT-registered suppliers can issue valid tax invoices that allow for input tax credit claims by the buyer.
3.Goods/Services for Taxpayers Selling ONLY Exempted/Specific VAT Rated and Other Non-Standard Rated Goods/Services:
If your business only sells goods or services that are exempt from VAT, subject to specific VAT rates (which might not allow for input credit), or other non-standard rated supplies where input credit is restricted, then the VAT paid on your local purchases related to these outputs might not be admissible for credit. This often applies because there is no output VAT liability against which to offset the input tax.
4.Payment Not Made Through Banking Channels (for transactions exceeding BDT 100,000):
If the value of a taxable supply exceeds BDT 100,000 and the full consideration (including VAT) is paid through means other than a banking channel, the input tax credit related to that purchase is not allowed. This provision aims to promote transparency in financial transactions. Note that the specific threshold might be subject to changes, so it's crucial to refer to the latest regulations.
5.Passenger Vehicles:
Input tax credit is generally not allowed on the purchase or import of passenger vehicles. Additionally, any VAT paid on the spare parts or repair and maintenance services for such vehicles is also not creditable.
6.Goods or Services Under the Possession or Custody of Another Person:
VAT paid on goods or services that are under the possession or custody of a third party might not be eligible for input tax credit.
7.Raw Materials Purchased on Credit (in some interpretations):
There have been differing interpretations regarding input tax credit on purchases made on credit. Some argue that input tax credit is only allowed on VAT that has been paid. If the consideration (including VAT) for a purchase remains outstanding, the eligibility for input tax credit might be questioned. However, if the tax portion of the credit purchase has been paid, it might be creditable. This area can be subject to specific conditions and interpretations by the tax authorities.
8.Input tax credit is not permissible for VAT paid on purchases directly linked to the supply of goods or services that are exempt from VAT or are otherwise not subject to VAT.
It's crucial to note that the admissibility of input tax credit is subject to various conditions and specific provisions within the Value Added Tax and Supplementary Duty Act, 2012 and its rules. Taxpayers should maintain proper documentation (such as valid tax invoices) and ensure compliance with all relevant regulations to claim input tax credit. For definitive guidance on specific scenarios, consulting with a tax professional or referring to official notifications from the National Board of Revenue (NBR) is always recommended.