Presented by

Hadee Lutful & Co.

Chartered Accountants
Date: 01 July 2020
 SRO No. 149-Aain/2020/110-Mushak dated 11 June 2020:
The Withholding VAT Deduction and Collection Rules, 2020

Compulsory VAT Deduction:

• Recipient of supply must be a Withholding Tax Entity
• Supply of goods at a reduced VAT rate less than 15% or specified tax as mentioned in the 3rd schedule
• Supply of services at the rates mentioned in the next slides:

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HS Code Name of Service Rate Remarks
(%/Tk.)
S001.10 AC Hotel 15% New
S001.20 AC Restaurant 15% New
S001.10 Non-AC Hotel 7.5% Table-2, Part-Kha
S001.20 Non-AC Restaurant 7.5% Table-2, Part-Kha
S002.00 Decorators & Caterers 15% New
S003.10 Motor vehicle garage & workshop 10% Table-3, Part-Kha
S003.20 Dockyards 10% Do
S004.00 Construction firm 7.5% Table-2, Part-Kha
S007.00 Advertisement firm 15% New
S008.10 Printing Press 10% Table-3, Part-Kha
S009.00 Auction Firm 10% Do
S010.10 Land development firm 2% Paragraph-3 3
HS Code Name of Service Rate Remarks
(%/Tk.)
Building construction firm: Paragraph-3
(i) for square feet 1 to 1,600 2% Do
S010.20
(ii) for square feet 1,600 and more 4.5% Do
(iii) for reregistration of any size 2% Do
S014.00 Indenting firm 5% Table-1, Part-Kha
S015.10 Freight forwarders 15% New
S020.00 Survey firm 15% New
S021.00 Firm letting out plant & machinery 15% New
Showroom of furniture:
a) at the production stage 7.5% Table-2, Part-Kha
S024.00
b) at the marketing stage (subject to having treasury challan of 7.5% VAT 7.5% New
at production stage, otherwise, 15%)
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HS Code Name of Service Rate Remarks
(%/Tk.)
S028.00 Courier and Express Mail Service 15% New
S031.00 Person, enterprise or organization engaged in repair and servicing 10% Table-3, Part-Kha
S032.00 Consultancy Firm and Supervisory Firm 15% New
S033.00 Lessee 15% New
S034.00 Audit and Accounting Firm 15% New
S037.00 Procurement Provider 7.5% Table-2, Part-Kha
S040.00 Security Service 10% Table-3, Part-Kha
S043.00 Supplier of program for television and online broadcasting 15% New
S045.00 Legal Advisor 15% New
Transport Contractor:
S048.00 • in case of petroleum products 5% Table-1, Part-Kha
• in case of others goods 10% Table-3, Part-Kha
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HS Code Name of Service Rate Remarks
(%/Tk.)
S049.00 Rent-a-Car 15% New
S050.10 Architect, Interior Designer or Interior Decorator 15% New
S050.20 Graphics Designer 15% New
S051.00 Engineering Firm 15% New
S052.00 Renting out Sound System and Lighting materials 15% New
S053.00 Participants of Board Meeting 10% Table-3, Part-Kha
S054.00 Telecasting Advertisement through Satellite 15% New
S058.00 Renting out Helicopter or Chartered Plane 15% New
S060.00 Purchaser of goods at auction 7.5% Table-2, Part-Kha
S065.00 Cleaning or maintenance services of building, floor & compound 10% Table-3, Part-Kha
S066.00 Seller of Lottery Ticket 10% Do
S067.00 Immigration Consultant 15% New 6
HS Code Name of Service Rate Remarks
(%/Tk.)
S071.00 Event Management Firm 15% New
S072.00 Human Resource Supply or Management Firm 15% New
S099.10 Information Technology Enabled Services (ITES) 5% Table-1, Part-Kha
S099.20 Other Miscellaneous Services 15% New
S099.30 Sponsorship Services 15% New
S099.50 Credit Rating Agency 7.5% New

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HS Code Name of Service Rate (%/Tk.) Remarks
S012.14 Internet Service Provider 5% Table-1, Part-Kha
S026.00 Goldsmith, silversmith and gold and silver shopkeepers and gold repairer. 5% Do
S057.00 Electricity Distributor 5% Do
S069.00 English Medium School 5% Do
S080.00 Ride Sharing 5% Do
S099.10 Information Technology Enabled Services 5% Do
S099.60 Goods sale online 5% Do
S064.10 Amusement park and Theme park 7.5% Table-2, Part-Kha
(a) Marketing of own branded readymade garments
S078.00 7.5% Do
(a) Marketing of readymade garments without own brand
S036.20 AC launch service 10% Table-3, Part-Kha
S013.00 Mechanical laundry 10% Do
S018.00 Movie studio 10% Do 8
HS Code Name of Service Rate (%/Tk.) Remarks
S023.10 Movie exhibitor (Theater/Cinema) 10% Do
S023.20 Movie distributor 10% Do
S042.00 Automatic or Machine-driven sawmill 10% Do
S047.00 Sports organizer 10% Do
S063.00 Tailoring shop & tailors 10% Do
S076.00 Social and sporting club 10% Do
S012.20 SIM card provider 200/= (per Table-4, Part-Kha
SIM card)

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 Particulars Registered recipient Unregistered recipient

Applicable rate 15% 15%

Recipient itself and send a copy of treasury Bank
challan to bank.
Deducting/collec
If recipient fails to provide treasury challan or Not applicable
ting authority
deposited amount falls short of the applicable
VAT, bank itself.
Economic code Recipient’s Commissionerate or, as the case Bank’s Commissionerate
may be, Bank’s Commissionerate

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• 15% VAT shall be collected at source on the total amount received from the beneficiary at the time of issuance or
renewal of license or, as the case may be, in the case of any facility creating services, by the government, semi-
government, autonomous body and local authority.

• 15% VAT shall be collected at source on the total amount received on account of revenue sharing, royalty,
commission, charge, fee or any other receipts under the condition stated in the license, registration and permit
issued.

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In the case of “Tenant of space and establishment” service, total VAT on rent at the rate of 15% shall be collected by the
tenant.

Exemptions (SRO No. 144-Aain/2020/105-Muhak dated 11 June 2020):

• Factory rent of registered/enlisted manufacturer/producer

• Facility provided for completely residential use
• Establishment with an area not exceeding 150 sqf used for commercial purpose
• Space or establishment rented by ITES provider registered under service code S099.10
• Rent on show-room of business managed by a woman entrepreneur

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• Supply of goods/services or both, except exempted supply, against quotation or tender or work order or in any other manner.
• Recipient of supply is withholding tax entity such as any ministry, division or office, semi-government or autonomous body, state
owned entity, local authority, council or similar organization, non-government organization approved by NGO Affairs Bureau or
Department of Social Services, any bank, insurance company or similar financial institution, any educational institution of secondary
or higher level and limited company.
• Manufacturer, service renderer and trader will not be regarded as procurement provider.
• Those services shall not be considered procurement provider that have specific definitions.
• Supply of goods or service, exempted through gazette notification, by procurement provider shall be subject to VDS.
• Service exempted through gazette notification as procurement provider shall be regarded beyond the scope of VDS.
• VDS under the scope of procurement provider service is not applicable to supply of goods at reduced VAT rates mentioned in 3rd
schedule subject to payment of VAT.

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• Supply of goods chargeable to 15% VAT issuing Mushak 6.3

• Supply of service chargeable to 15% VAT excluding those mentioned in the table through Mushak 6.3
[

*** Ambiguity:
➢ 15% VAT rate is applied for services mentioned in the table instead of applying reduced rate: will such supply fall
under the scope of VDS?

➢ Services mentioned in 3rd schedule but not included in the table and not covered by the non-deduction criteria as set
out in VDS rules: will such supply fall under the scope of VDS?

• Payment of bill for utility services, namely fuel, gas, water (WASA), electricity, telephone and mobile phone

• Supply of goods or service or both as mentioned in 1st schedule

• Zero-rated supply under section 21

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• Will not accept any supply or make any payment if Mushak 6.3 is not issued by the supplier

• Will deposit within 15 days from the date of payment

• Will issue Mushak 6.6 within 3 days of deposit in government treasury

• Will send original Mushak 6.6 and treasury challan to VAT circle and copies to the supplier

• Preserve copies of certificate and treasury challan for 5 years

• Will make increasing adjustment in VAT return and deposit the remaining balance, if any, after making adjustment of
VDS deposited through treasury challan against net VAT payable for the tax period concerned.

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• Shall issue Mushak 6.3 at the time of supply of goods or services
• Shall mention price and amount of VAT or specific tax in Mushak 9.1
• Will make decreasing adjustment in return after receiving Mushak 6.6 from the withholding tax entity
• Will make adjustment in the tax period in which tax payable on supply is paid or within the next 6 months.
• On expiry of the aforementioned time, any claim for adjustment shall be barred by limitation.

Economic code in treasury challan:

For withholding tax entity (registered/unregistered), economic code shall be the Commissionerate related to the said entity

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• The withholding tax entity and the supplier shall be jointly and severally liable for deduction of VAT at source and
depositing the same in the government treasury.

• If VAT is not deducted at source despite being under obligation for making such deduction, the said amount along with
interest at the rate of 2% per 6 months shall be realizable from him in such a manner as if he were the supplier of
goods or services.

• The relevant Commissioner may impose personal penalty under section 85 (1Ka), for an amount not exceeding Tk.
25,000/=, on the person responsible for deduction, if VAT is not deposited in the government treasury within the
prescribed time after deducting the same.

• Both the supplier of goods/services and the recipient of the supply shall be held equally liable for failure to deduct
VAT at source and deposit the same in the government treasury.

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• If there is more than one component in a supply, each component and pertinent value shall have to be separately
mentioned in tender, quotation or bill relating to the said supply.

• VAT shall have to be deducted at source applying appropriate rate to each of such component.

• Where contract was made before the VAT & SD Act, 2012, entered into effect but value has not yet been paid,
provisions applicable at the time of payment shall be applied to such supply.

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Reference Previous provisions New Provisions
Section 53 A registered person, other than a withholding entity, In the case of receiving supply by a withholding tax
who makes a supply to a withholding entity shall, on or entity from a registered person, the said
before the date of making such supply, issue to the withholding tax entity shall issue a withholding tax
withholding entity an integrated tax invoice and certificate in the manner prescribed by NBR at the
withholding certificate containing the prescribed time of making payment against the said supply
information.
Section 49 (3) A withholding tax entity shall make an increasing adjustment for the amount of withheld VAT, and shall pay
the withheld VAT in such manner and at such time as are specified below, namely: —

(a) for a registered withholding tax entity: at the time of filing the return for the tax period relating to the
supply on which tax was withheld; and
(b) for a withholding tax entity not registered: at the prescribed time and in the prescribed manner.

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