Declaration authentication by responsible persons for (VAT Return 9.1)

 

In Bangladesh, the principle behind exports is that they are generally zero-rated for VAT and Supplementary Duty (SD). This means that exporters do not charge VAT or SD on their exports, and critically, they are eligible to get back the VAT and SD paid on the inputs (raw materials, components, services) used to produce those exported goods. This mechanism is crucial for making Bangladeshi exports competitive in the international market by preventing the accumulation of domestic taxes.

Here's how Supplementary Duty (SD) paid on inputs against exports is typically handled in Bangladesh:

1. Zero-Rating for Exports:

• Under the VAT and Supplementary Duty Act, 2012, direct exports of goods and services are generally zero-rated. This means no VAT or SD is charged on the final export sale.

2. Refund/Drawback Mechanism:

• Since exporters don't charge SD on their exports, any SD they paid on imported or domestically procured inputs used in the production of those exports creates an accumulated tax burden. To prevent this, the government has a duty drawback scheme.
• Drawback is the refund of duties and taxes (including Customs Duty, Regulatory Duty, VAT, and Supplementary Duty) paid on inputs/raw materials used for the manufacture of exported goods and services.

3. Mechanisms for Reclaiming SD on Inputs:

• Duty Exemption and Drawback Office (DEDO): This is the primary authority responsible for processing drawback claims. Exporters apply to DEDO for refunds of duties and taxes, including SD, paid on their inputs.
• Actual Case-to-Case Basis: For many products, exporters claim drawback based on the actual duties and taxes paid on the specific inputs used for a particular export consignment. This requires detailed record-keeping of input consumption and duty/tax payments.
• Flat Rate Drawback: For certain specified goods (e.g., some jute products, ceramics, leather goods), the NBR may issue SROs allowing a "flat rate" drawback. This simplifies the refund process, where a fixed percentage of the export value (or a fixed amount per unit) is refunded as drawback, without needing to calculate actual input duties for each consignment. This is common for industries with standardized production processes.
• Bonded Warehouse Facility: 

 For eligible exporters (especially those in the Ready-Made Garment sector and other export-oriented industries), a bonded warehouse facility is a more common and efficient mechanism. Under this system:

• Exporters are allowed to import raw materials and inputs duty-free (including exemption from Customs Duty, SD, VAT, etc.) if these inputs are to be used in the manufacturing of goods destined for export.
• This facility effectively prevents the payment of SD (and other duties/taxes) at the import stage itself, eliminating the need for a subsequent refund. Exporters operate under a bond with Customs, ensuring that the imported inputs are indeed used for export production.
• This is generally preferred over the drawback system as it improves cash flow by avoiding upfront payment of taxes.

4. Legal Provisions:

• The eligibility for drawback and the procedures are primarily governed by the Customs Act, 1969, and the VAT and Supplementary Duty Act, 2012, along with their respective rules and SROs issued by the NBR.

Important Considerations for Exporters:

• Documentation: Meticulous record-keeping of all import/purchase documents, production records, and export documents (e.g., Bills of Entry, commercial invoices, export LC, Bill of Export, EXP forms) is crucial for claiming drawback or for compliance under the bonded warehouse system.
• Compliance: Adhering to all NBR rules and procedures for drawback claims or bonded warehouse operations is vital to avoid penalties and ensure timely refunds/exemptions.
• Dynamic Regulations: The rates and procedures for SD, VAT, and drawback can be updated by the NBR through SROs, especially during annual budget announcements. Exporters must always refer to the latest notifications.

In summary, Bangladesh's tax policy aims to make exports competitive by ensuring that the SD (and other indirect taxes) paid on inputs for exported goods are either exempted at the import/purchase stage (via bonded warehouses) or refunded through a duty drawback system.