NBR urges Power Div not to pass on new VAT rate to subscribers

Posted by BankInfo on Wed, May 31 2017 08:55 am

New law provides for refund of VAT

The Value Added Tax (VAT) Wing of the NRB has requested Power Division to declare the current electricity tariff plus 5% VAT as supply price following enforcement of the new VAT law from July 01 next.

VAT policy member Jahangir Hossain sent a letter to the power division secretary on Tuesday to consider the present power tariff at the consumers' level as MRP (maximum retail price).

VAT Wing has taken the move to dispel fear among consumers about the possible rise in power tariff after implementation of a uniform VAT rate under the new VAT and Supplementary Duty Act 2012.

Currently, there is 5.0 per cent VAT on power tariff that might be raised to 15 per cent after implementation of the new law from July 1.

The NBR letter said now there exists 15 per cent VAT indirectly and 5.0 per cent directly on power tariff.  

Power Division pays 15 per cent VAT on purchase of inputs, including fuel, gas and coal, under the existing VAT Law 1991. It will be able to claim refund of the paid VAT under 'input credit system' according relevant provision in the new VAT law. The provision is not there in the current law.

As the government offered VAT exemption in power generation and imposed 5.0 per cent truncated-base VAT on supply stage, Power Division is not allowed to claim the tax refund on inputs.

The new law has addressed the 'distortion' in the VAT system. Valuation process of products and services will be changed in the new VAT law.

Consumers will pay less VAT to the government under the new law even though power tariff remains the same, the letter said.

The existing VAT law has two processes - VAT inclusive and exclusive, but the new law has the provision to conduct valuation only on VAT inclusive. Prices of services and products will be VAT inclusive under the new law.

For example, per unit power tariff is Tk 9.0 and after adding five per cent VAT (Tk 0.45) it stands at Tk 9.45. In the new law, VAT on power tariff will be calculated to the amount of Tk 1.23 on the total power tariff of Tk 9.45.

However, Power Division can claim refund on the paid VAT on purchase or import of inputs for power generation.

news:financial express/31-may-2017
Posted in Banking, News

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