All services provided by banks to their clients are set to come under the purview of Value Added Tax (VAT) from the next fiscal as the proposed budget has slapped the same on bank clients.

bank clients will have to pay 15 per cent VAT from 2012-13 fiscal to get any services from banks.

A NBR official said the proposed budget for the next fiscal has brought all the banking services under VAT net.

Currently, only service related to opening of Letters of Credit (L/Cs) is subject to pay 15 per cent VAT.

It has not been explained in the VAT law whether clients will be required to pay VAT on other services of banks.

"In the budget 2012-13, the government clearly defined that all the services of banks will come under the purview of VAT. The VAT law has incorporated the provision to resolve confusion on this matter," said a top VAT official.

Now VAT officials have to explain or make clear to bankers what are the services to be covered under VAT, he added.

A senior banker said only L/C related services is now subject to VAT payment while others are not.

"From the upcoming fiscal, bank clients will have to pay 15 per cent additional amount for availing all types of banking services," he said.

There are nearly 50 standard services that all banks are providing to the clients including services on L/C, amendment to bank guarantees conditions, standing order for deduction of deposit etc.

The bank official said banks are likely to face agitation from clients if banks start charging VAT.

"It seems difficult for us to convince customers on payment of newly imposed VAT which is not income of the respective banks," he said, preferring anonymity.

Shahjahan Bhuiyan, Managing Director of UCB, said already people are over burdened with increased cost of doing business.

"Power, gas and inflationary pressure are mounting. Consumers will have to bear the additional cost on account of proposed VAT," he said.

He expressed the fear that a large amount of loans would be classified by next December due to those negative factors.

The country's commercial banks are providing different services including SME banking, dual currency VISA credit card, virtual card, remittance business, locker services, ATM services, internet baking, e-statement.

The Financial Express/Bangladesh/ 17th June 2012