The National Board of Revenue can collect an additional Tk 10,000 crore by ensuring the use of electronic cash registers at retail and wholesale outlets, according to a letter it sent to the finance ministry.
In an effort to curb VAT dodging, the NBR is set to procure 10,000 ECRs at a cost of Tk 100 crore to be given to the large shops, restaurants and other businesses at the purchase price.
NBR Chairman Md Nojibur Rahman said revenue collection will rise for the use of ECRs. The finance division is considering the matter positively, he added.
The NBR’s move came after Finance Minister AMA Muhith unveiled plans to buy the machines in his budget speech, to encourage its use in sales record keeping and curb VAT evasion.
Based on the directive, the NBR submitted a paper to Muhith near the end of last month; the minister gave clearance to the bid.
In a recent letter to Finance Secretary Mahbub Ahmed, Rahman said retail and wholesale trade contributes about Tk 200,000 crore or 13 percent to the gross domestic product.
A 15 percent VAT on the amount should generate revenue worth Tk 30,000 crore. Of that amount, Tk 8,000 crore to Tk 10,000 crore can be collected in a year, given the the VAT exempted areas are deducted, it added.
However, the potential remains untapped because of limitations in the tax system under the existing VAT law and a prevalence of waivers in a number of areas.
“It is a very conservative estimate. The revenue potential is higher if we can connect all the retail and wholesale stores to our server and if customers collect purchase invoices properly,” said Syed Mushfequr Rahman, deputy project director of VAT Online Project.
He expects the tender to be floated within two weeks.
There are 8,007 entities in Bangladesh that are suitable to use the devices under the pilot phase, according to feedback from the revenue administrator’s field offices. NBR said the ECRs will have fiscal memory, which will prevent sales executives from deleting data and ensure the actual amount of tax.
The devices will also be connected to a server at NBR, so that traders cannot destroy or switch off the ECRs to avoid paying the actual VAT amount. As a result, it will be possible to take instant remedial measures if any ECR reports inconsistencies, said NBR.
The NBR also plans to run the system for five years for installation, commissioning and maintenance. It will ink deals with suppliers of the devices for maintenance and support, according to the letter.
The government takes the move to ensure that shops are using the devices, as it plans to implement the VAT and Supplementary Duty Act 2012 in July.
The law envisages 15 percent VAT and seeks to end the package or fixed VAT benefit enjoyed by the retailers, including many large and medium retails, although they do not fall under the category.
As there will be no package VAT under the new law, stores that have an annual turnover of above Tk 30 lakh will have to pay a 3 percent turnover tax under the law.