Fine/Penalty for Non-submission of VAT Return

How does other Fine/Penalty /Interest for VAT adjustment purpose?

In Bangladesh, beyond the general penalties for late VAT return submission and interest on overdue VAT/SD, there are other fines, penalties, and interest provisions related to various non-compliances and inaccuracies in VAT adjustments, as outlined in the VAT and Supplementary Duty Act, 2012 and its associated rules and SROs.

Here's a breakdown of other potential fines, penalties, and interest that can apply for VAT adjustment purposes:

1. Penalty for Incorrect or Fraudulent Adjustment:

Incorrect Input Tax Credit Claim: This is a common area of scrutiny. If a business claims input tax credit for VAT that was not genuinely paid, or if the inputs are not eligible for credit (e.g., used for exempt supplies, or not supported by proper Mushak-6.3 invoices), this constitutes an incorrect adjustment.

Penalty: The NBR can impose a penalty of not less than half and up to equal of the amount of input tax credit irregularly claimed. This can be a significant financial burden.
Interest: In addition to the penalty, interest at the rate of 1% per month will be charged on the amount of VAT that was effectively underpaid due to the incorrect input tax credit claim, from the original due date until the corrected payment is made.

Under-inclusion of Output Tax in Return: If a business fails to include all its output tax (VAT on sales) in its return, leading to an underpayment, this is also an incorrect adjustment.

Penalty: Not less than half and up to equal of the amount of output tax not included.

Interest: A 1% per month charge on the underpaid amount, calculated from the original due date.
Incorrect Decreasing Adjustment (Leading to Underpayment): If a business makes an incorrect "decreasing adjustment" in its return (e.g., claiming a refund or reduction based on a fictitious credit note, or an ineligible advance tax claim), and this leads to an underpayment of VAT, the penalties and interest for underpayment will apply. The penalty might be twice the value of the increased decreasing adjustment, or half to equal the amount of the decreased increasing adjustment. (This wording can be complex and requires precise legal interpretation).
Willing Evasion or Attempt to Evade Tax: If it's proven that a taxpayer deliberately or willfully evaded or attempted to evade the assessment and payment of taxes (including VAT and SD), the penalties are severe.

Penalty: Not less than half and up to equal of the amount of tax evaded. This can also lead to criminal prosecution and imprisonment.

2. Interest on Underpaid Tax (General Rule):

Rate: As mentioned before, the standard interest rate is 1% per month on any amount of VAT or SD that is not paid by its due date. This applies to any underpayment resulting from an incorrect adjustment, a re-assessment, or simply a mistake.

Calculation: Interest is calculated daily, starting from the day after the due date until the date the payment is actually made.

3. Penalties for Documentary Non-Compliance:

Not Issuing Tax Invoice (Mushak-6.3), Credit Note (Mushak-6.9), Debit Note (Mushak-6.8), or Withholding Tax Certificate (Mushak-6.6): A penalty of BDT 10,000 can be imposed for each instance of failure to issue these mandatory documents. Proper documentation is fundamental for valid VAT adjustments.
Not Maintaining Records in Prescribed Manner: Failure to keep proper records as required by the VAT Act and Rules can incur a penalty of BDT 10,000. Accurate records are essential for justifying any VAT adjustments.
Non-submission of Input-Output Coefficient: For certain manufacturers, failure to submit the input-output coefficient declaration within the prescribed time can lead to a penalty of BDT 10,000. This directly impacts the calculation of input tax credit eligibility.

4. Penalty for Obstructing Officials:

Obstruction of NBR Officials: Preventing or obstructing NBR officials from carrying out their duties (e.g., during an audit or inspection) can lead to an administrative fine of up to BDT 5,000.

Important Considerations:

Finance Act Updates: Penalties and interest rates can be revised through annual Finance Acts and subsequent SROs. Businesses must always refer to the latest NBR notifications.
Intent vs. Mistake: The NBR has shown some leniency for unintentional mistakes (e.g., in payment or input credit claims) in recent years, provided the correct tax is paid with interest later. However, this does not waive the interest component and severe penalties still apply for deliberate evasion.
Audit and Assessment: These penalties and interest often come to light during NBR audits, assessments, or investigations, where discrepancies in VAT returns and adjustments are identified.
Appeals: Taxpayers generally have the right to appeal against penalty impositions and interest calculations, following the administrative and judicial appeal hierarchy (Commissioner, Appellate Tribunal, High Court).

In summary, the NBR has a comprehensive framework of fines, penalties, and interest to ensure compliance with VAT laws in Bangladesh. Accurate record-keeping, correct calculation of VAT liabilities and adjustments, and timely submission of returns are paramount to avoid these additional financial burdens.

Others Fine/Penalty /Interest for VAT adjustment ?