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| Excise duty for VAT adjustment |
How does apply payable of Excise duty for VAT adjustment purpose?
In Bangladesh, the concept of "Excise Duty" has largely been integrated into or superseded by the Value Added Tax (VAT) and Supplementary Duty (SD) frameworks, as defined under the VAT and Supplementary Duty Act, 2012.
Historically, Excise Duty was a significant inland tax on goods manufactured or produced domestically, as governed by the Excises and Salt Act, 1944. However, with the introduction and subsequent amendments to the VAT system, the scope of traditional Excise Duty has significantly narrowed.
Current Status and Applicability of Excise Duty:
Today, in Bangladesh, Excise Duty is primarily applicable in very specific, limited scenarios, most notably on:
- Bank Account Balances/Transactions: Excise Duty is levied on bank account balances based on specific thresholds. This is a common and direct application of Excise Duty that customers of banks experience.
- Air Tickets: A form of Excise Duty is sometimes applied to domestic air tickets.
- Specific products: While most "excisable goods" have shifted to SD or VAT, a very few specific items might still retain an excise duty.
How does Excise Duty (if applicable) relate to VAT adjustments?
Given the highly limited nature of traditional Excise Duty, its interaction with VAT adjustment is minimal, and you generally cannot apply Excise Duty paid for VAT adjustment purposes in the way you would claim input VAT.
Here's why:
- Separate Tax Regimes: Even though both are indirect taxes, Excise Duty and VAT operate under distinct principles and calculation methodologies. VAT is a multi-stage tax with an input tax credit mechanism, while Excise Duty, where it still applies, is typically a single-stage tax at a specific point (e.g., at the bank, or at the point of ticket purchase).
- No Input Tax Credit for Excise Duty: The VAT Act, 2012, specifies the conditions for claiming input tax credit, which is exclusively for VAT paid on inputs. There is no provision to claim credit for Excise Duty paid against your output VAT liability.
- Cost Component: For businesses, any Excise Duty paid (e.g., on their bank accounts) would typically be treated as an operating expense, similar to other non-adjustable taxes or fees. It would be factored into their overall cost structure but would not reduce their VAT payable.
- Reporting in Mushak-9.1: The monthly VAT return (Mushak-9.1) has specific sections for VAT and Supplementary Duty. While it includes various adjustments for VAT and SD, there isn't a dedicated section to adjust or claim credit for Excise Duty paid against VAT.
Example:
If a business pays Excise Duty on its bank account, this amount is a cost to the business. When the business calculates its monthly VAT liability (output VAT minus input VAT from eligible purchases), the Excise Duty paid on the bank account is not an eligible input tax credit and cannot be used to reduce the net VAT payable.
In summary:
While historically Excise Duty was a broader concept, in modern Bangladeshi taxation under the VAT and Supplementary Duty Act, 2012, its direct application for VAT adjustment purposes (e.g., as an input tax credit) is not applicable. Excise Duty, where it still exists, functions as a separate, distinct tax, and its payment does not entitle a business to a reduction in its VAT liability.