Commercial banks or financial institutions (FIs) have been authorised to deduct Value Added Tax (VAT) from commission income on account of mobile banking services.

The National Board of Revenue (NBR) has issued a guideline recently empowering the banks and FIs to deduct commission.

Earlier, taxmen had to collect tax from commission income of each of the parties or agents involved in the mobile banking services.

The NBR recently framed the guidelines for collection of VAT from commission income of the mobile banking following popularity of the service.

According to the VAT law, the government collects 15 per cent VAT (inclusive method) from service charges of mobile banking. On Tk 100 service charges, VAT is Tk 13.04 and service charges are Tk 86.96.

The VAT wing of the revenue board recently issued the guideline for its tax offices and other stakeholders specifying the rules of tax collection from commission income of mobile banking services.

It also sent the guideline to the Bangladesh Bank (BB), the banking sector regulator.

Many parties are involved in the mobile banking including banks, telecom operators, agents at grassroots level and technical service provider.

Both tax officials and stakeholders were in a state of confusion about the way of collecting tax from commission of the mobile banking services.

A senior NBR official said the NBR found that mobile operators requested the banks to handover their part of commission of mobile banking services including VAT.

"It is difficult to collect VAT from each of the agents and parties of mobile banking services. The guideline has been framed to make the system simple," he said.

To obtain the services, mobile phone subscribers have to open accounts in their names with the local agents of banks. Account holders can deposit, withdraw and send money through mobile phones. Each subscriber or client gets a number with their respective mobile phone numbers.

Agents or technical service providers take a service charge from the clients for depositing and sending money. The service charge is distributed among the partners of the services according to the agreement.

Earlier, tax officials had to collect VAT from different points due to absence of specific guidelines.

From now on, only banks and FIs will pay the VAT on behalf of all other partners and give them a certificate of tax payment. The NBR will consider the agents under the VAT registration of banks.

Mobile banking service providers do not give any cash memo at the time of withdrawal of money. So accounts details of clients should include cash memo number, date and time, name and address of the service providers and service seekers, registration numbers, received commission including VAT and signatures, the guideline said.

Recently, bKash limited (a subsidiary of BRAC bank) has gained huge popularity of mobile banking services. It is a joint venture between BRAC Bank Limited, Bangladesh, and Money in Motion LLC, USA. The ultimate objective of bKash is to ensure access to a broader range of financial services for the people of Bangladesh. It has a special focus to serve the low income masses of the country to achieve broader financial inclusion by providing services that are convenient, affordable and reliable. The government also introduced mobile banking services through post offices. But its service charges are tax-free.

News: The Financial Express/Bangladesh/04-Nov-12