VAT Adjustment through Banking channel
How does VAT adjustment when payment not made Through Banking channel?
The Value Added Tax and Supplementary Duty Act, 2012 in Bangladesh has specific implications for VAT adjustment when payment for a supply exceeding BDT 100,000 is not made through banking channels. In such cases, the input tax credit related to that purchase is not allowed.
Here's a breakdown of how this affects VAT adjustment:
- No Initial Credit: If you purchase goods or services worth more than BDT 100,000 and pay for them through cash or any means other than a banking channel, you cannot initially claim any input tax credit on the VAT you paid on that purchase.
- Increasing Adjustment: If a business does take input tax credit on a purchase exceeding this threshold where the payment was not made via banking channels, they are required to make an "increasing adjustment" in their VAT return for the same tax period. This increasing adjustment effectively reverses the input tax credit that was incorrectly taken.
- Subsequent Credit After Banking Channel Payment: According to some interpretations and clarifications issued by the National Board of Revenue (NBR), if the payment is later made through a banking channel (within a specific timeframe, which has been mentioned as six tax periods/six months in some instances for raw materials purchased on credit), the business may then be eligible to make a "decreasing adjustment" in their VAT return. This would allow them to claim the input tax credit retroactively.
- Partial Payment: If only a portion of the payment exceeding BDT 100,000 is made through a banking channel, input tax credit might only be applicable to the extent of the payment made through the banking channel. There can be complexities in handling such partial payments, and it's advisable to seek specific guidance.
In essence, the VAT regulations incentivize payments through banking channels for transactions exceeding BDT 100,000 by making it a prerequisite for claiming input tax credit. Failure to comply with this can lead to the dis allowance or reversal of previously claimed credits.
It's important to note that the specific rules and interpretations related to this provision can evolve, and businesses should always refer to the latest official pronouncements and Statutory Regulatory Orders (SROs) issued by the National Board of Revenue (NBR) for the most accurate and up-to-date guidance. Consulting with a tax advisor is also recommended for specific scenarios.