Monthly VAT Return – in View of Bangladesh
This paper represents an overview of Value Added Tax (VAT) in Bangladesh. It depicts the basic features of Value Added Tax and its implication, and importance in the growing economy of Bangladesh. Bangladesh faces many problems in raising sufficient tax revenues to fund its economic and social development. To address this problem and to improve economic efficiency and growth, a major tax reform program was initiated in 1991 which centered on the introduction of a value-added tax (VAT) to replace a range of narrowly-based consumption taxes. This study works as a linkage between theory and practice on Value Added Tax. The article represents the social and economic development of the country with the basic awareness which is going at a steady pace among the people and the organization considering it as a key to further economic Development. The awareness of Value Added Tax (VAT) is not very old, but still within a short span of time it has shown a remarkable change in the corporate sector and the economy of the country. It has developed a complete sense of care and responsibility towards the country and the welfare of the people.
A value-added tax or value-added tax (VAT) is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price, whereas, from the seller‘s point of view, it is a tax only on the "value-added" to a product, material or service, at the stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts and retains the rest for themselves to offset the taxes them
Referred to as a sort of national sales tax, though it functions very differently. Sales tax is imposed on the total retail price of the item sold, while VAT tax is imposed on the value added at each stage of production and distribution. And though more complicated than sales tax, value-added tax systems have more checks against tax fraud because the tax is assessed at more than one point in the distribution process.
(I) on the basis of coverage of stages - throughout the production and distribution stages, or confined to limited stages - manufacturing plus wholesale, or wholesale plus retail;
(ii) On the basis of the method of calculation - tax credit method, subtraction
Method, and addition method; and
(iii) On the basis of tax treatment of final product capital goods such as machinery, equipment, and supplies - the consumption form, the income from, and the product variety. Thus the three broad types of VAT are the gross national product (GNP) type, income type, and consumption type. A consumption-type VAT is an indirect tax. An income type or a GNP type VAT might be considered as a direct tax but a commodity tax cannot be considered so. Consumption type VAT is also considered as an alternative form of 'sales tax'.
- The Vat Assessment Process
The process of assessing value-added tax occurs roughly as follows:
- The manufacturer adds value to a product; the amount of value-added can be described as the difference between the cost of the materials used to make the product and the price charged to the customer (often a wholesaler).
- The manufacturer pays value-added tax (a percentage of the value-added), which is then included in the purchase price charged to the customer (wholesaler).
- The manufacturer gets a rebate from the government for VAT paid on the materials.
- The customer (wholesaler) pays VAT on the value they add, which can be described as the difference between what they paid to the manufacturer and the price at which they sell it to their customer (retailer). This VAT amount is included in the price charged to the retailer.
- The wholesaler gets a rebate for VAT from the government for the VAT paid to the manufacturer.
- The retailer pays value-added tax on the value they add, which can be described as the price charged to customers less the wholesale cost and includes the VAT in the final sales price of the product. The retail store collects value-added tax from the person buying the product (retail price thus includes all VATs collected at each stage of this process) and gets a rebate for the VAT paid to the wholesaler.
- Basic Characteristics of Value Added Tax