Thesis Report on

Revenue Collection by the GOB from Direct

and Indirect Sources of Taxes

SUPERVISED BY

Dr.Raad Mozib Lalon

Associate Professor
Department of Banking and Insurance
Faculty of Business Studies
University of Dhaka.

SUBMITTED BY

Md. Zakir Hossain Howlader

ID No. 51824036
MTM Program
2 nd Batch

SUBMITTED TO
Master of Tax Management (MTM)
Department of Banking and Insurance
University of Dhaka

Date of Submission: 30 November,2022

 (ii)

LETTER OF TRANSMITTAL

Date: 30 November, 2022

Dr.Raad Mozib Lalon Associate Professor

Department of Banking and Insurance
Faculty of Business Studies
University of Dhaka
Subject: Submission of the thesis paper on the topic of “Revenue Collection by the GOB
from Direct and Indirect Sources of Taxes"

Dear Sir,

This is to great pleasure to inform you that I have prepared my thesis paper on “Revenue
Collection by the GOB from Direct and Indirect Sources of Taxes”The making of the report
gave me an opportunity to know about the Income Tax department and taxpayer activities in
our country. In writing this paper, I have tried my best to apply the concepts learnt in my
program along with the actual experience learned while working for this report. I tried the
utmost I was capable of preparing this paper and hope it will satisfy your expectation.

With due respect, I would like to request you to excuse for any mistake of mine that may
exist in this paper despite my best effort and to view them with your generous consideration.
Your advice and continuous support helped me a lot accomplishing the goal.

Thanking you,

Sincerely Yours,

-----------------------

Md. Zakir Hossain Howlader

ID No. 51824036
MTM Program
2nd Batch
Department of Banking and Insurance
Faculty of Business Studies
University of Dhaka
 (iii)

Declaration by the Student

I hereby declare that the Internship Report on “Revenue Collection by the GOB from direct

and indirect sources oftaxes”is my original work that has been prepared for earning the

degree of Master of Tax Management and has not previously been submitted to any other

authority for earning any other degree,diploma, or fellowship in any other discipline.

The entire work has been planned and carried out by me under the supervision of

Dr.Raad Mozib Lalon, Associate Professor, Department ofBanking and

insurance, University of Dhaka, Bangladesh.

________________________
Md. Zakir Hossain Howlader
ID No. 51824036
MTM Program
2 nd Batch
Department of Banking and Insurance
Faculty of Business Studies
University of Dhaka
 (iv)

Certificate

This is to certify that the internship report on “Revenue Collection from direct tax and
indirect sources of taxes”, is prepared by Md. Zakir Hossain Howlader, (ID No. 51824036)
MTM Program as a partial requirement of the degree of Master of Tax Management.

The whole work of this internship report has been planned and carried out by this student

under supervision and guidance of the designated faculty member of the Department of

Banking and Insurance, University of Dhaka,Bangladesh.

________________________

Dr.RaadMozibLalon

Associate Professor
Department ofBanking and Insurance
University ofDhaka.
 (v)

ACKNOWLEDGEMENT

We would like to express my profound gratitude to our honorable faculty

Dr.RaadMozibLalon, Associate Professor, Department of Banking and

Insurance, Faculty of Business Studies (FBS), University of Dhaka for his constant
supervision, continuous guidance, encouragement and valuable suggestion at every stage of
my work to prepare this report. It was an amazing experience with him. I am eternally
gratitude and owing to him, without his help it would be almost impossible for me to
complete the paper within this short time.
 (vi)

Executive Summary

Income tax is a kind of direct taxation. Every citizen has to pay tax if his/her
income crosses a level of income which is declared by NBR every year. There
are several slabs to pay taxes. Taxes are paid according to slabs. All companies
have to pay corporate tax. The rate of corporate tax also published by NBR.

VAT is one of the taxation. It is introduced instead of sales tax and excise duty.
It is paid different kinds of seller of goods and service. It is finally shifted on the
consumer. VAT is started in Bangladesh for fair revenue collection. Most of the
countries who introduced VAT have been benefited before. So it is introduced
in Bangladesh for growing revenue scientifically.

Bangladesh could not develop economically. She had many problems.

Enhancement revenue was one of them at best VAT was introduced in 1991. It
was replaced sale tax and custom duty. Bangladesh faced many problems. First
we had to get help collecting system from other countries. Now a day’s
Bangladesh is able to collect VAT in scientifically more than before.
 (vii)

LIST OF CONTENTS

Chapter Title Page

No.
Chapter-01
Introduction ------------------------------------------------------------------- 1-3
Chapter- 02
0000002.2 Literature Review 3-4
Chapter-3 Three
3.1 Methodology 4
Chapter-04 Four
4.1 Theoretical Framework 4
4.2 Definition of value added Tax 4
4.3 History of VAT 4
4.4 Revenue Collection 5
4.5 Overview 5
4.6 Revenue collection From Direct tax: 6
4.7 Income year (Time period covered) and assessment year 6
4.8 Determination of residential status 6-7
4.9 Classification of income under different heads 7
4.10 Exclusion of income not chargeable to Tax 7
4.11 Computation of income under each head 7
4.12 Clubbing of income of spouse, Minor child etc. 8
4.13 Set-off or carry Forward of losses 8
4.14 Computation of gross total income 8
4.15 Dedication from gross total income 8
4.16 Total income 8
4.17 Application of the rates of tax on the total income 9
4.18 Surcharge 9-10
4.19 Revenue collection From Indirect tax 10-11
4.20 Vat Registration And Enlistment 11
4.21 What is VAT and Supplementary Duty 11
4.22 Input Tax 11
4.23 Output Tax 11
4.24 VAT Books Accounts 11-12
4.25 Books of Accounts for purchase and sales 12
4.26 VAT Invoice 12
4.27 Input tax (VAT) credit 12
4.28 VAT exempted goods and service 12
4.29 Theory of Value Added Tax (VAT) 12
4.30 Tax Period: Tax period means 13
4.31 Imposition of Tax 13
4.32 Stage of Tax Imposition 13
4.33 Tax Rate 13
4.34 Tax Payment Time 13-14
4.35 Person Liable to Pay VAT and SD 14
4.36 Supply of Tax exempted, Taxable & Zero% 14
 4.37 Determination of Taxable Value 14
4.38 Import Stage 14-15
4.39 Here other duties include 15
4.42 Supply Stage 15
4.44 Assessment of Net Payable Tax 15
4.45 Input Tax Credit 15
4.46 Increasing and Decreasing Adjustment 15
4.47 Tax withheld at source and increasing or decreasing adjustment by the 15-16
withholding entity
4.45 Filling of Return 16
4.46 Audit and enquiry 16-17
4.47 Sources of VAT and SD 17
4.49 Direct Tax and Indirect Tax Types 17
4.50 Some types of indirect taxes are 18
4.51 Differences between Direct and Indirect Tax are 18-19
4.52 There are some disadvantages of Direct tax. They are given below 19
4.53 Pinching 19
4.54 Inconvenient 19
4.55 Evasion and Corruption 19
4.56 Uneconomical 19
4.57 Narrow based 19
4.58 Arbitrary 20
4.59 Disincentiveness 20
Chapter-05
5.1 Data Analysis 20-21
5.2 Disadvantages Of Indirect Taxes 21
5.3 Indirect Tax can be regressive 21
5.4 They raise price of commodities 21
5.5 No civic consciousness 21
Chapter-06
6.1 Findings 22-23
Chapter-07
7.1 Recommendations& Conclusion 23-24
References 24

LIST OF TABLES AND FIGURE

Table Title Page

One Organogram --------------------------------- 8-9
No.
Two Income Slab --------------------------- 13
Three Surcharge 14
Four Import Stage invoice 20

LIST OF ABBREVIATIONS
CNY : Chinese Yuan
GDP : Gross Domestic Product
FY : Fiscal Year
NBR : National Board of Revenue
TDS : Tax Deduct at Source
TIN : Tax Identification Number
TDS : Tax Deduct at Source
 01
Introduction:

There are two kinds of taxes. One is direct tax and another indirect tax. Income
tax is an indirect taxation. NBR has declared the slabs of paying tax. Every
assesse has to pay income tax according to the slab. Besides this,all of company
has to pay income tax according to the rate of tax that published NBR.

VAT is an another kind of taxation. It is an indirect tax, It was introduced first

instead of sales tax and excise duty. VAT is paid by consumer finally. VAT is
changed in different stages like manufacture, whole seller, retailer or dealers.
The charges are shifted to the consumer finally. It is very transparent tax system
which is accepted all over the world. It is very easy to control by administration.

Bangladesh is a developing country. It has to face many problems. Financial

problem is the main part of them.This problem can be solved by revenue
collection. For solving the problem Bangladesh initiated in 1991 to introduce
VAT. NBR tried to develope revenue. Bangladesh took different steps for
collecting more revenue with comparing other countries. Different suggestions
were given us. NBR has eccepted some advices to enhance revenue.

Government of Bangladesh has to impose tax on many areas. Income tax is one
of them. It is paid by the every assesse according to the slabs given by NBR.
NBR prepares them under the tax ordinance in 1984. It is calculated in total
income. In the ordinance there was no definition of income tax. But in section
16 of ITO 1984, Slabs can be changed in respect of total income. Bangladesh
got the income tax from British and Pakistan rule. After that the system of
income tax has been revised and made new rule according to necessity in our
country.

Tax evasion and preventing revenue leakage through system loss. In the Indian
Subcontinent, first Income Tax Act has been introduced in 1860 by the then
English rulers following the income Tax Act of England. After five years of its
introduction, it has been repealed and withdrawn in 1867 due to the rapid
changes in the political and socioeconomic culture of the state. Then it has been
again introduced by the government as the License Act, 1987 to finance the
budget deficit. In 1868, the name of the Act has been changed as ``The
Certificate Act 1868`` featuring certain provisions like reduced tax rats,
exemption up to a certain limit of total income, tax relief for agricultural income
etc.In 1869, ``The Income Tax Act- II`` has been passed after doing necessary
changes in ``The Certificate Act, 1868``. Here tax has again been charged on

02

agricultural income. This Act has been repealed and withdrawn again in 1873
but later further introduced in 1877 in the name of ``The License Tax Act,
1877``.

It has been followed up to 1886. In 1886, British government has introduced

The Income Tax Act- 1886; Act II of 1886``. Again in 1918, incorporation
various amendments of this Act, ``The Income Tax Act- 1918; Act VII of
1918`` has been passed by the English government. In this Act, the total income
has been divided into six heads named salaries, interest on securities, income
from house property, income from business, Income from profession and
income from other sources.

In 1921, a committee named ``All India Committee`` has been formed to

evaluate the need for necessary changes in this act. On the basis of the
recommendations and guidelines suggested by this committee, ``The Income
Tax Act-1922; Act XI of 1922`` has been introduced. The introduction of this
act is considered the most significant achievements in the income tax law in
Indian Subcontinent since the current tax laws of Pakistan, India and
Bangladesh has been introduced on the basis of this Act.India and Pakistan both
the country accepted ``The Income Tax Act- 1922; Act XI of 1922`` as their
income tax law after independence from British rule in 1947. Then in India
``The Income Tax Act-1961`` has been introduced incorporating necessary
changes in the earlier Act of 1922. But, Pakistan had been following the old
``The Income Tax Act-1922; Act XI of 1922`` incorporating some amendments
in the following years like Tax Holiday Scheme of 1959, Self-assessment
system of 1965 etc.

After its independence in 1971, Bangladesh has also inherited the ``The Income
Tax Act-1922`` which has been followed in Pakistan and adopted it with
necessary changes made from time to time. In order to modify necessary
changes of the old act to cope with the demand of time, It needed a taxation
enquiry commission. It has been made in 1976. At first income tax act was
introduced in 1922. Then according to recommendation of committee income
tax ordinance 1984 was approved. It had two mannual-11, It had chapters 23
and section-187. Under the ordinance there were some rules SRO. All were
controlled by NBR.
NBR had power to changes any rules for collecting revenue but all of the
changes turned into law after approval of parliament As a step of ongoing tax
reform measures, a new draft law titled ``The Direct Taxes Code, 2012``

03

relating to0 direct taxes have been introduced in the year 2012. The government
has a plan to make it effective from 1 st July, 2018. Before passing the final Act,
the government has taken opinions from various bodies and general public. The
new law will reduce the current loopholes of the tax law as well as increase the
revenue of tax collection in Bangladesh.

Literature Review

Tax is the main source of government to income system of collecting tax can
play a vital role. Different countries claim differently about Tax collect and
expenditure of government Blanchard and Poretti take objection about them in
2002 and 2014. All government need invest in different ways. The tax income
effect development it also improve the government GDP and individual the
improvement of business, depend on the tax policy. In Bangladesh reform the
tax policy soon to improve business in whole we found the study of Chinese.
The increase their GDP depending on the growth of tax revenue Nigerian
economist thought that the revenue growth and economic growth are related one
another they grew different types taxes and GDP from 1956-2012 by forced that
tax growth and GDP growth make a growth aggregate. One of woman
Luttffunnahar in Bangladesh compared tax revenue with 15 others countries
specialists through that tax revenue can develop the GDP growth of any
country. Their Growth reflect the complement of budget of a country. Different
economist commented differently but Lutfunnahar examined Bangladesh with
15 others developing countries, It is country depend on the tax revenue, But in
Bangladesh budget be imbalanced due to tax revenue. There are different kinds
of relationship between tax revenue and GDP. Reciprocal is one of them
according to this relationship commodities VAT is implemented in Bangladesh.
As a result VAT on indirect tax plays a vital role of GDP. So it helps
implemented budget in Bangladesh.

The system of VAT was not started first. Bangladesh got it from Pakistan and
Pakistan got it from British. At first Bangladesh introduced VAT, But there
were various types of leakage. TO build up it optimizing system was changed
again and again.
In Bangladesh income tax in another options of tax. At first Bangladesh
introduced income tax rule 1860. It was the rule of British. After five years of
its introduction, it has been changed and withdrawn in 1867 due to the rapid
changes in the political and socio-economic culture of the state. Then it has
been again introduced by government as the License Act, 1987 to finance the

04

budget deficit. In 1868, the name of the Act has been changed as “The
Certificate Act, 1868” featuring certain provisions like reduced tax rates, tax
exemption up to a certain limit of total income, tax relief for agricultural income
etc. It is also given by Roshita at 2011-2018. The analysis about tax revenue and
GDP of Malaysia between 1970 and 2009. They depended on Standard GDP
depending on tax revenue.Bangladesh got Independent in 1971, but the VAT
was not introduced at first. It was introduced in 1991-1992 financial year. New
VAT law passed in 1991. At first it was very popular tax system. As it is
indirect tax people of Bangladesh pay it easily. Export and Import are very
important activities in a country so at the time of export and import VAT is
implement in Bangladesh. As a result of Bangladesh can each a lot of indirect
tax as VAT. One the other side at the time of selling.

Methodology

6.1Research Type:

The research types depending on secondary data. It was acted from Bangladesh
Bureau of Statistic (BBS) NBR (National Board of Revenue), Ministry of
finance and ministry of planning of Bangladesh converted 4 years.

Theoretical Framework

Definition of value added tax

VAT is one kind of Tax. It is changed on goods. When goods are sold survey
seller add some value. Every added value changed levied. It is changed goods
and service. VAT was different from important tax. But now a days it is not
different. Now day VAT is very popular in Bangladesh.
 History of vat
VAT means value added tax. F.Von scientist wrote it British in 1918. German
research it as turnover tax. It was called different name in different countries. At
last France was the first country that VAT accepted instead of turn over tax.

05

Then European Economic Community (EEC) accepted it is value added tax

instead of turn over tax. After that some other countries found. Some Different
from it. Eastern European countries like soviet republics, Asia, China, Thailand,
Philippines implemented it from 1987 to 1997. But Bangladesh implemented it
during the mid 1990s. VAT has been original key to tax system by 2000s. After
that VAT was more populated in 20 countries of the world for collecting tax.
Now it is the most important element of the world to collect tax.

REVENUE COLLECTION:

Overview:
Every person has to submit his personal income tax. If an amount of certain
figure is crossed he has to pay tax. All of the personal income system prescribed
in the Finance Act every year. The person who live in Bangladesh more than 80
days in a years called residential. He has to pay income tax in Bangladesh
according to income tax ordinance NBR published the rules and regulation for
collecting and paying income tax every years. NBR follow the act of national
Assembly of Bangladesh published in 30 June every years.

NBR is responsible for formulation and continuous re-appraisal of tax policies

and tax laws negotiating tax treaties with foreign governments and participating

ininter-ministerial deliberations on economic issues having a bearing of fiscal

policies and tax administration.It works with three tax-type wings namely, Tax

wing, Customs wing and VAT wing.There are two more wings named IT wing

and Research & Statistics wing under NBR.The chairman is assisted by seven

members of the Customs, Excise and VAT cader and eight members of the
Income Tax cadre. The members of NBR hold the rank of additional Secretary.

They are appointed by the government.

06

4.6REVENUE COLLECTION FROM DIRECT TAX

 Determination of income year (Time period covered and assessment

year
 Determination of residential status
 Classification of income under different heads
 Computation of income under each head
 Clubbing of income
 Adjustment of funds
 Assessment of total income
 Gross total income
 Total income
 Tax rate
 Surcharge

Revenue collection From Direct tax:

Income tax levied on an assesses total income. Such total income has to be
computed as per the provisions contained in the income Tax ordinance 1984 and
the other relevant laws. Let us go step by step to understand the procedure of
total income computation to levy of income tax-

Income year (Time period covered) and assessment year: The time period
covered in the relevant income year of an assessed has to be determined first.
The income earned during the relevant income year time period will be
considered for computing total income. The assessment year will also be
determined accordingly. Income Tax collected from assesse total income.
Bangladesh income tax ordinance in 1984. Tax has to be collected according to
it now we can tell about it by turns.

Residential status: The residential status of a person is to be determined to

ascertain which income is to be included in computing the total income. There
are two option of the prayer. One is Residential and other is Non-Residential.
The residential has to pay tax according to income tax ordinance in 1984. They
are given below.

Residential statuses Under the income Tax Ordinance,1984.

07

a)Resident.
B)Non-Resident.
i)Non-Resident Bangladeshi
ii)Non-Resident Foreigner.

Classification of income under different heads:

Tax return Format, total income is classified under ten heads. They are-

1. Salaries
2. House hold income
3. Profits and Gains of Business or 4.Profession
5. Capital Gain
6. Interest on security
7. Agriculture income
8. Foreign income
9. Profit of a partnership firm.
10. Clubing.

The above heads of income are levied by tax prayer. They has to divided
according to head.

Exclusion of income not chargeable to Tax:

There are certain incomes which are wholly exempt from income tax e.g.
pension, gratuity, interest on zero coupon bond. There incomes are calculated
separately. There are not added with total taxable income. There are some
incomes which are exempted. There are included with exempted income.
Computation of income under each head:

There are seven specific heads of income. Another heads is expect seven heads
or other source. Every sources of income has different expectable expenses
acceptable from income.

08

Clubbing of income of spouse, Minor child etc.:

In case of individuals income tax is levied on a slab system on the total income.
The tax system is progressive i.e. as the income increases the applicable rate of
tax increases. So taxpayers in the higher income bracket may divert some
portion of their income to their spouse, minor child etc. to minimize their tax
burden. In order to prevent such tax avoidance, clubbing provisions have been
incorporated in the ITO,1984, under which income arising to certain
persons( like spouse, minor child etc.) have to be included in the income of the
person who has delivered his income for the purpose of computing tax liability.

Set-off or carry Forward of losses:

According to income of the same head set-off may happen. If an assesse
incomes more in the one side of a head and loses in the another side of the head,
he can adjust them for example when an assesse income more in printing and
loses in selling button he can set-off them and Cary forward in happened when
an assesse income more in one head of income and loses in another heads of
income can cay forward them.

Computation of gross total income:

Finally income is calculated often deducting allowable allowances and other
adjustments. All are aggregated calculation all head including clubbing income
which is called gross income.

Dedication from gross total income:

There may have dedication prescribed from gross total income. Such as, as per
ITO 1984 if agriculture is the only source of income there will be a deduction of
TK20000 from the gross total income.

Total income:
Total income is calculated often dedication allowance from gross income. This
is also taxable income

09

Application of the rates of tax on the total income:

According to finance Act the rate of taxes are given below.

Income Slab Rate

On the 1stTk.300000 of total income Nil

On the 2nd Tk.100000 of total income 5%

On the 3rd Tk.300000 of total income 10%

On the 4thTk.400000 of total income 15%

On the 5thTk.500000 of total income 20%

Rest of all 25%

The minimum non assessable income limit will be TK 350000for women, and
elderly citizens begin more than 65 years of ages. For disable person and gazette
wounded freedom fighters the minimum non assessable income limit will be Tk
450000 and Tk.475000 respectively. The minimum non assessable limit of the
parents or legal guardians of disable person will be Tk50000 more but in case of
being both father and mother taxpayers only one will avail the benefit.

However the minimum tax would be Tk 5000 (Dhaka north & south &
Chittagong city Corporation area) TK 4000 (other city Corporation area)Tk
3000 ( areas other Than city Corporation) . For companies different tax rates are
applicable ( e.g. Bank 40% to 42. 5% public limited Co 25%, private limited co
35% etc. The tax rates have to be applied on the total income to arrive at the
gross income tax liability.

Surcharge:

Surcharge is calculated with wealth.If is percentage of total tax.

Net Wealth Amount Rate of surcharge

Up to Tk.3 crore Nil

More than Tk.3crore but less than 10 crore 10%

10

or
having more than one motor car
or
Having more than 8000 Square fit house property in any
City corporation

More than Tk. 10crore but less than 20 crore 20%

More than Tk.20 crore but less than 50 crore 30%

More than Tk.50 crore 35%

4.19 REVENUE COLLECTION FROM INDIRECT TAX

 VAT Registration and enlistment

 What is VAT and Supplementary Duty
 Input Tax
 Output Tax
 VAT Books Accounts
 Input Tax (VAT) Credit
 VAT exempted goods and service
 Theory of Value Added Tax (VAT)
 Tax Period
 Imposition of Tax
 Tax Rate
 Tax Payment Time
 Person Liable to pay VAT and SD
 Determination of Taxable Value
 Supply stage
 Filling Return
 Audit and enquiry
 Sources of VAT and SD
 11

Revenue collection From Indirect tax:

VAT Registration and enlistment:

According to the Value Added Tax and Supplementary Duty Act, any business
entity or taxpayer with a yearly turnover over Tk. 3.00 crore must have a VAT
Registration. If yearly turnover is below Tk. 3.00 crore but above Tk. 50.00
lacs, it must have a VAT enlistment. Any change in the financial activity of a
registered or enlisted person must be duly informed to the commissioner. VAT
registration and enlistment is required to enjoy the following benefits, such as
Import and export, supply of commodities or services against tender agreement
or work orders, enlistment in any association, enjoying tax rebate, issue of VAT
Challan (Mushok 6.3) etc. are worth mentioning.

What is VAT and Supplementary Duty:

VAT is one kind of indirect tax. If is calculated to sale. VAT invoice is essential
for a person. Every assesse has to be registered. He can issue VAT invoice is
following ways. The tax imposed on the luxury items and socially untoward
goods according to the second schedule of the VAT law during their import and
supply stage is known as Supplementary Duty.

Input Tax:

The tax paid during the procurement of raw materials is called Input Tax. This
tax is adjusted with the tax payable in the supply stage.

Output Tax:

The VAT paid by the registered person on supply of taxable goods, services or
tangible assets or on import of taxable services, is called output tax.

VAT Books Accounts:

Every registered person must preserve at the place of supply the following
books, challan, certificate of tax deduction at source, etc.
 i) Books of Accounts for purchases: Every manufacturer must maintain a
book of accounts for purchases in the prescribed form (Mushok-6.1).
Each and every record related to purchases must be kept in this book.

12

ii) Books accounts for sale: Every manufacturer must maintain a book of
accounts for sale in the prescribed form (mushok-6.2). Each and every record
related to sales must be kept in this book.

Books of Accounts for purchase and sales:

When a registered person sales his purchased goods without any alteration, then
every record of financial transaction must be kept in the books of accounts for
purchase and sales.

VAT Invoice:
A registered person shall issue VAT invoice in accordance with the following
procedure, such as –

i) Mushak-6.3 from is issued against each supply.

ii) It is ecologically according to financial years.

iii) If is issued two copies. One is for buyers and another is office copy.

iv) Sometimes invoice and certificate should be issued.

Input tax (VAT) credit:

When a registered person supplies any goods or services, credit is issued by

adjusting input tax against the tax payable.

VAT exempted goods and service;

Goods and services mentioned in the first schedule of the VAT & SD Act are
the VAT exempted goods and services. Besides, some goods and services are
exempted from VAT by SRO issued by NBR. But if not included in the next
finance act, such exemptions are repealed.

Theory of Value Added Tax (VAT):

VAT is imposed during supply of goods or services. Addition of price to the
price of purchase before sales is called Value Addition. In general, the
difference between the selling price and purchase price is considered as the
value added.

13

Value Added = Output – Input

Tax Period: Tax period means -

a) There are two kinds of tax period. One is monthly another is every 3 months.
VAT is calculated is every month. Turn over is calculated after three
months.

Imposition of Tax:

According to the rules of Section 15, Section 55 and Section 63 of the Value
Added Tax & Supplementary Duty Act, 2012, the following taxes are imposed.

a) Value Added Tax

b) Supplementary Tax
c) Advance Tax
d) Turnover Tax
Stage of Tax Imposition:

● Value Added Tax - Import and Domestic supply stage

● Supplementary Tax: Import and Domestic supply stage
● Advance Tax - Import stage
● Turnover Tax - Domestic supply stage
Tax Rate:

According to section 15 of the Value Added Tax & Supplementary Duty Act,
2012, the ideal rate is 15%. For export 0%. But a lower rate can be imposed for
goods and services declared in the third schedule. At present there are four tax
rates prevailing, such as -15%, 10%, 7.5% and 5%. According to section 63, a
reduced rate of 4% turnover tax is imposed on medium business concerns.
Again, according to section 55, various rates of supplementary duty are imposed
on luxurious goods and services included in the second schedule.
Tax Payment Time:
● In case of import, tax is to be paid during the payment of import duty.

● For general supplies, the 15th day of the next month (registered person).

14

● Turnover tax for enlisted companies is to be paid within the 15th date of the
month next to the end of a tax period.

● For deduction at source for a registered person - within the 15th of the
following month.

● For deduction at source for a non-registered person - within three days of the
payment of the bill.

Person Liable to Pay VAT and SD:

Every person specified below shall be liable to pay VAT & SD, namely –

a) Person has to pay VAT & SD is below.

b) At the time of import. (Importer)

c) At the time of supply. (Supplier)

d) In relation to any sale of any goods by an auctioneer on behalf of a registered

person in the prescribed manner: the auction

Supply of Tax exempted, Taxable & Zero%

● Under section 26 of the VAT law, imports and supplies included in the first
schedule are exempted.
● According to section 55, supplementary duty is imposed on luxurious goods
and services included in the second schedule.
● All the other supplies are VATable.
● Any supply aimed at export will avail zero%.
Determination of Taxable Value:

Tax is imposed at the import and supply stage for which the taxable price must
be determined first.
● Import Stage: During the import stage, VATable price is determined by
addition of custom duty, supplementary duty and other duties to the assessable
value.

[Price for imposition of supplementary duty = Assessable

value+Importduty+Regulatory duty]

15

[VATable price = Assessable value+Importduty+Supplementaryduty+other

duty]

[Value for imposition of advance tax = VATable price]

● Here other duties include - regulatory duty (RD), Safe guard duty (SGD),
Counter Veiling Duty (CVD), Anti-dumping Duty (ADD), etc.

Supply Stage:

The value obtained after deducting the tax fraction from the price of the taxable
supply is called the supply value. In this case tax fraction will be R/(100+R)

Assessment of Net Payable Tax:

According to section 45 of the VAT Act, the net tax is to be paid in every tax
period. Net payable tax is determined with four elements, such as –

● All output tax and supplementary duty of the tax period.

● All input tax rebate of the tax period

● All increasing adjustments of the tax period

● All decreasing adjustments of the tax period

Net payable tax of a tax period = (Payable tax - rebate + increasing adjustment -
decreasing adjustment)

Input Tax Credit:

Adjustment of input tax against output tax is called tax rebate.

Increasing and Decreasing Adjustment:

The increase of output tax is called increasing adjustment and decrease of output
tax is called decreasing adjustment.

Tax withheld at source and increasing or decreasing adjustment by the

withholding entity:

● ● The entity deducting tax at source will do the increasing adjustment to the
deducted VAT.

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● If VAT is deducted at source from the supplier then it will be subjected to

decreasing adjustment.

● The concerned authorities will be accountable for deducting the tax at source
and depositing it to the government treasury.

● When VAT is paid on a supply in a tax period, it has to be adjusted in that tax
period or within six months. Otherwise any claim for adjustment will forfeit.

Filing of Return:

The taxpayer must submit his tax return for each tax period within the 15th date
of the next period.

● Tax return to be prepared after calculating adjustment of all purchase and

supplies.

● Net payable tax has to be determined for every tax period

● If net tax is a positive value, then it has to be deposited to the treasury.

● If net tax is a negative value, then it should be carried on for balancing in the
next tax period.

● Tax return has to be submitted online to the concerned VAT office

● Submission of tax return without paying the tax is a violation of law.

● Fine or interest has to be paid for due tax.

Audit and enquiry:

According to the section 90 of the VAT Act, financial activities of any person
can be audited to prevent tax evasion.

● A VAT officer, authorized by the Commissioner or Director General submits

an report to them after conveying the audit.

● If tax evasion is found in the audit report, then the authority with determine
the tax liability and collect it.

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Moreover, according to Article 128 of the Constitution, the Office of

Comptroller and Auditor General carries on the audit functions.

● If tax evasion is found in that audit, it is duly informed to the authority.

● If the evaded tax found in the audit is not collected in due time, it is included
in the annual report of the CAG.

● According to Article 132 of the Constitution, the report is conveyed to the

President.

● Afterwards, the report is discussed in the Public Accounts Committee of the

National Parliament and recommendations are made.

Sources of VAT and SD:

According to the VAT Act, VAT and SD are consumer level taxes. Consumers
pay these taxes. These taxes comes from the following sources –

● Internal supply and import are the source of Value Added Tax and
Supplementary Duty.

● Internal supply is the source of Turnover tax and

● Import is the source of Advance Tax.

Comparison from direct tax and indirect tax.

 Type of Direct Tax and Indirect Tax

There are two types of tax. one is direct tax and another is indirect tax. Direct
tax is calculated in a time of the year. It is calculated by NBR. It is collected
every individual. Main direct taxes are below.
Major types of direct tax include :
 Income Tax: It is collected from Individual every years.
 Corporate Tax: It is collected from company depending on its profit.
 Wealth Tax: It is collected from the value of wealth of a person.
 Estate Duty: It is collected when a person inherit wealth.
 Gift Tax: It is collected when a person give any taxable gift to other.
 Fringe Benefit Tax: Employee have to pay tax. When a employee get
fringe benefit from anotherity he has to pay tax.

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Another types of tax name indirect tax. It is always shifted from one person to
another. It is shifted at the end person from the beginning.

There are some indirect taxes:

 Excise Duty:It Pay manufacturer who shifts the burden to Wholesalers.
 Sales Tax: It pay shopkeeper who shift the burden to customer.
 Custom Duty: it depends on import.
 Entertainment Tax: film business man transfer the burden to the cinema
goers.
 Service Tax: It is the Charge of services rendered.
Taxes are of two kinds. One is direct tax and another is indirect tax. Direct tax
cannot shift from one person to another. But indirect tax can be shifted.
There are some differences between direct tax and indirect taxes. The main
difference is that direct tax is paid individual and indirect tax is shifted to other.
There are some direct taxes as income tax, corporate tax, wealth tax, sale tax,
gift tax etc and some indirect taxes are as VAT excise duty, Sales tax, etc

Differences between Direct and Indirect Tax are

Main differences between Direct and Indirect Tax are
1. Direct tax is paid by the tax payer directly but indirect tax can be shifted
to last buyer.
2. The burden ofdirect tax cannot be transferred but the burden of indirect
taxes can be transferred.
 3. In direct taxes a person can evaded tax, while indirect taxes cannot be
possible.
4. Inflation can be reduced for Direct tax but inflation can increase
for indirect tax. 
5. In direct taxes it is easy to allocate and collection but in indirect taxes it
is not easy.
6. Direct taxes isprogressivebutindirect taxes is regressive.

7. Direct taxes is costly to collect and indirect tax is less costly.

Direct tax is one of the tax that every individual has to pay it. It is called
progressive. It is calculated every person according to has/her total income of a
year. If can help to pressure on the economy. Indirect tax is regressive tax. It
continues stable economy. It is to be paid every person in the society.

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Through there are some differences between direct tax and indirect tax. Both of
them help to collect a lot of taxes. So they are the main life of a country.
Development of a country completely depends on the tax system of that
country.
There are some disadvantages of Direct tax. They are given below:
1. Pinching 2.Inconvenient 3.Evasion and Corruption 4.Uneconomical5. Narrow
based 6. Arbitrary 7.Disincentiveness.
1. Pinching:
Direct tax is paid an assessed according to his/he income so it pinch more.
2. Inconvenient:
As the direct tax is paid only the person who has income more than a slab, It
cannot be inconvenient. On the other side the assessed has to pay lump-sum
they may be inconvenient.

3. CORRUPTION AND TAX EVASION:

Income tax is submitted depending on self-assessment. Tax payers have many

chances to evasion tax. Real tax calculations depend on honesty.

4. Uneconomical:
 The government should make direct tax economical. Further, elaborate
machinery is required for their collection as each and every assesse has to be
contacted individually and properly checked to prevent tax evasion.

5. Narrow based:

Direct tax can be progressive and narrow based. So it is not possible to touch all
of sections of people in the society. A large sections of people specially the poor
remain untruth.

6. Arbitrary:

The nature of direct tax may be different. One of them is arbitrary. The finance
division try to give proper judgement but fail because the system can not
support it.

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7. Disincentiveness:

Direct tax is calculated with income and wealth. There is no incentive of hear
work. So people are not agree to work had.

Data Analysis Tool

1. Direct Tax

Financial Year 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22

Gross Collection 558987 638542 695743 741944 849712 1002036 1136614 1049294 944873 1250000
of Direct Taxes

Net Collections 391006 460300 492755 471226 517995 621601 675253 653754 580886 808800
of Direct Taxes
(Rs. In Crores)

GDP at Current 9944013 11233522 12467959 1377187 1539166 1709004 1889966 2007485 1980091 2321470
Market Prices 4 9 2 8 6 4 3
(Rs. In Crores)

GDP Growth 13.80% 12.97% 10.99% 10.46% 11.76% 11.03% 10.59% 6.22% -1.36% 17.24%
Rate

Direct Tax GDP 3.93% 4.10% 3.95% 3.42% 3.37% 3.64% 3.57% 3.26% 2.93% 3.48%
Ratio
Direct Tax 17.72% 7.05% -4.37% 9.92% 20.00% 8.63% -3.18% -11.15% 39.24%
Growth Rate

2. Indirect Tax

Gross Collection 477247 500192 549142 713704 866110 916972 943851 960764 1082231 1266059
of Indirect
Taxes

Net collection of 350871 355554 410860 472539 583378 620886 641958 703147 845401 956345
Indirect Taxes
(Rs. Crore)

Indirect Tax- 3.53% 3.17% 3.30% 3.43% 3.79% 3.63% 3.40% 3.50% 4.27% 4.12%
GDP Ratio

Indirect Tax 1.33% 15.55% 15.01% 23.46% 6.43% 3.39% 9.53% 20.23% 13.12%
Growth Rate

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3. Total
Total Collection 1036234 1138734 1244885 1455648 1715822 1919008 2080465 2010058 2027104 2516059

Total Tax 9.89% 9.32% 16.93% 17.87% 11.84% 8.41% -3.38% 0.85% 24.12%
Growth Rate

Total Tax GDP 10.42% 10.14% 9.98% 10.57% 11.15% 11.23% 11.01% 10.01% 10.24% 10.84%
Ratio

Total Collection 741877 815854 903615 943765 1101373 1242487 1317211 1356901 1426287 1765145
Net

Total Tax 9.97 10.76 4.44 16.70 12.81 6.01 3.01 5.11 23.76
Growth Rate

Total Tax GDP 7.5 7.3 7.2 6.9 7.2 7.3 7.0 6.8 7.2 7.6
Ratio

DISADVANTAGES OF INDIRECT TAXES

Indirect Tax can be regressive

Indirect tax should be paid everybody because everybody has to purchase goods
for their life lead. As it is shifted to end person it has to be paid all. But the rich
can be paid very easily, the poor has to pay it with very hardship so indirect tax
may be regressive.
They raise price of commodities
Seller need profit always so they increase the price of goods for more profit. As
a result buyer has to buy more prize. So the prize of commodities gross-up.
No civic consciousness

There is no civic consciousness. As the general people do not know about

indirect tax but they has to pay. So it has no civic consciousness.

Findings:

Revenue Collection Management of NBR: In the study of Direct Tax and

Indirect Tax the following findings are worth mentioning:

 i) Promotes equality

There a different income person in a society and direct tax has to be paid
according to ability. So it promote equality.

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ii) Promotes certainty

Direct tax is fixed according to the economic position of a country. The stable is
changed according to the salary. So it promote certainly.

iii) Promotes elasticity

It is the earning of government. If tax income make high the equality make high
and if tax income make low the government has to low income.

iv) Saves time and money

Direct tax is one kind of system that assesse can follow. It is paid in a certain
time if the year. It is collected some authority according to rule. So it save more
time

v) As parts of total tax revenue, the difference/gap between Direct Tax and

Indirect Tax is being continuously diminished. In the past, Indirect Tax had
always been more than Direct Tax.

vi) One of the goals in the Strategic Plan 2011-16 of NBR was to increase the
Tax-GDP ratio upto 13%. But up to 2015-16, the attained Tax-GDP ratio was
8.98%, presenting a shortfall of 4.02% from the original target.
vii) Although growth of GDP has been achieved, the growth of Tax Collection
has not been that much when compared to the former.

viii) The service sector and business entities are brought less under the tax net.
Moreover, electronic devices at the point of sales have not been installed for all
organizations.

ix) In the new VAT Act, the supply price includes VAT. But VAT is collected
on the supply price from the consumers. As a result it's producing a case of tax
on tax and the consumers are suffering the loss.

x) Contribution of VAT in the GDP of Bangladesh is about 4.24%

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Recommendations& Conclusion:

● Expansion of the tax net without increasing the rate of tax;

● To bring Internal Audit and Constitutional Audit under execution;

● To execute the recommendation of audit;

● To ensure growth is tax collection in line with growth of GDP;

● To ensure implementation of electronic device machine at each and every

point of sales;

● To prohibit tax on tax during tax imposition;

● To make the Taxpayer service sector taxpayer friendly;

Conclusion:
Bangladesh became independent politically, but the government together with
its people is still working to attain economic sovereignty. The taxpayers will be
more interested to pay their fair share of tax by increasing the quality of services
provided by the tax department to the taxpayers. Taxpayers will obtain general
and special knowledge about taxes, and the country will make economic
progress by the taxes paid by them. When facilities and services for the citizens
will be increased against paying the taxes, the tendency of taxpayers to evade
taxes will be decreased. The number of taxpayers and Tax-GDP ratio will
increase simultaneously. The ongoing development processes of the country
will make further progress and the citizen services and facilities will be
increased and the overall living standard of people will be improved. When the
taxpayer will know about the efficient, judicious and economic utilization of
their tax money for thedevelopment of the country, they will be more interested

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to pay their fair share oftaxes and the Taxpayer Citizen Ratio and also the Tax-
GDP Ratio will increase.

References

1. NBR website: www.nbr.gov.bd

2. Comparative Taxation, Chris Evans, John Hasseldine, Andy Lymer, Robert

Ricketts and Cedric Sandford

3. Tax Evasion & Avoidance- A real problem for Bangladesh- Nazib Zaman

4. RajaswaBhabonaJetehobeBahudur (Thoughts on Revenue Sector miles to go)

by Abu kawser

5. Bangladesh Income Tax by Dr. Nikhil Chandra Shil, Mohammad

ZakariaMasudandMohammadFaridulAlam

6. Bangladesh National Budget

7. The Financial Express, Date: 5 June, 2021, DoulotAkter Mala

8. ProthomAlo, Date: 2 August, 2021, Jahangir Sha

9. https://taxsummaries.pwc.com/peoples-republic-of-china/individual/taxes-on-
personal-income

10.https://www.newagebd.net/article/121689/system-snags-make-people-
reluctant-to-pay-tax

11. https://www.hrone.com › Legal & Regulatory.