Three schedules of New VAT Law

Schedule	Subject Matter	Types of subject matter
1st Schedule	List of Goods and Services exempted from VAT	Part-1 : Goods Part-2 : Services It includes all of the exempted followings- * Basic services for livelihood *Social services *Cultural services *Financial services *Transportation services *Personal services *Other services
2nd Schedule- Supplementary Duty + 15% VAT	Supplementary Duty imposable goods and Services	Table-1 : Goods : SD at Import stage Table-2 : Goods : SD at Supply stage Table-2 : Services : SD at Service/Supply stage
3rd Schedule	List of goods and Services where reduced and specific VAT rate applicable	Table-1 (Part A & B): Goods and Services at 5% Table-2 (Part A & B): Goods and Services at 7.5% Table-3 (Part A & B): Goods and Services at 10% Table-3 (Part A & B): Goods and Services at specific rate
VAT exempted by SRO	SRO 144-law/2020/105/MUSHAK, dated 11-06-2020 & Others	Table-1 : Goods : Import Stage Table-2 : Goods : Import and Manufacturing Stage Table-3 : Goods: Manufacturing stage Table-4 :  Service stage Table-5 : Trading  stage

 

What is Value Added Tax (VAT)?

 Value Added Tax (VAT), known in some countries as Goods and Service Tax (GST).

* It is an indirect tax  charged on the sale of goods and services.

*It is a tax on the purchase price.

*From the perspective of the buyer , it is a tax on the purchase price.

* From that of the seller, it is a tax only on the value added to a product or material or service.

* The added to a product by  or with a business is the sale price charged to its customer, minus the cost of materials and taxable inputs

 

Value Added Tax  = output Tax - input tax

Value Added Tax = Tax on  ( output cost)- Input cost.

 

Customs, VAT and Income Tax Acts and Rules

 

 Customs:

* Customs Act, 1969

VAT:

1. Value Added Tax and Supplementary Duty Act, 2012

2. The Excise & Salt Act, 1994

3.Value Added Tax and Supplementary Duty Act, 2016

Income Tax :

* Income Tax Ordinance, 1984

* Income Tax Rules 1984

 

VAT Introduced in Bangladesh

 ** The excise  and Salt Act 1994.

** VAT was introduced in 1991.

** The Value Added Tax Act 1991.

** The Value Added Tax Rules 1991 starts journey on 1st July 1991.

** Background of new VAT Law.

** The Value Added Tax and Supplementary Duty Act, 2012.

** The Value Added Tax and Supplementary Duty Rules, 2016.

** New VAT has been implemented from 1st July 2019.

 

IAS – 36 (Impairment):

 

        

Objective: It ensures that an asset is carried at no more than its recoverable amount. Definition: Sudden fall in value of asset. It occurs if   Net Book value(NBV)˂Recoverable amount Recoverable Amount = Higher of- Fair value less cost to sell (i.e. current market price if an active market exists) Value in use (I.e. Present value of future cash flows using the asset. Indicators Impairment:   External Sources- Market value has declined Changes in technological or economical environment having an adverse effect     Internal Sources- Evidence of obsolescence or damage to the asset   Internal assessment indicates that performance of the asset has become worse   IAS – 36 requires an entity to conduct annual impairment reviews Recognition: For assets carried at historical cost-charged as an expense in SOPL (i.e./S) For valued assets   If Impairment˂ previous revaluation:   Revaluation Reserve (OCI)      DR   Non-Current Assets (SOPF)                 CR     If Impairment˂ previous revaluation:   Revaluation Reserve (OCI)      DR   Impairment Expenses (SOPL)  DR   Non-Current Assets (SOPF)                 CR Impairment start of the year: Calculate depreciation for the year on new value (after deduction impairment) Impairment end of the year: Depreciation for the year is based on the NBV before impairment value. Revaluation gain after impairment: Non-current assets                                                   DR Reversal of impairment (SOPL)                               CR Revaluation reserve (if revaluations gain ˂ previous impairment)CR   Cash generating Unit (CGU):   It is the smallest identifiable group of assets which generates cash flows independently -When assessing the impairment of assets it will not always be possible to base the impairment review on individual assets. Impairment loss is allocated among the CGU as follows –   - Any other asset which is obviously impaired --  Purchased Goodwill relating to CGU     Other assets in CGU on a pro-rata based on carrying amount of assets.

IAS – 40 (Investment property):

 

·         Definition: Land or building owned by an entity that is held to earn rentals or for capital appreciation rather than business use or owner occupied.

·         Recognition:

-  Probable future economic benefits will flow to the entity

-  Cost of the investment property can be measured reliably

·         Measurement:
1. Cost model: Cost – Accumulated depreciation
2. Fair value model: At year-end –
-  If increase in fair value: Investment property Gain in fair value (SOPL)	DR	CR
- If decrease in fair value:   Loss on fair value (SOPL)   Investment property	DR	CR

  If index factor given: Fair value = Existing value X New factor

Existing factor

Transfers: If change in use takes place (i.e. transfer to or from investment property)

   -  If owner occupied property turns into investment property - the property would be  revalued up to             date of change in use to transfer it at fair value under IAS-40.

    - If investment property turns into owner occupied property - the property’s cost for subsequent             accounting would be the fair value at the date of change in use

IAS – 23 (Borrowing costs):

·         Objective: It deals with treatment of loan interest if loan has been particularly taken to construct/ purchase an asset that takes time to get ready for use.

        

           ·         Treatment:

Capitalized Amount = (Interest cost – Investment income on temporary investment)

  NCA                                                                                        DR

Cash/Bank/ Loan interest payable                                                        CR

* Start capitalization from the time activities of constructing the asset commences

*  Cease capitalization either due to completion of activities of constructing or due to suspension of construction for disputes