Assignment on EFDMS

1. Title Page

 Title: Electronic Fiscal Device Management Systems (EFDMS)

 Your Name: Md. Omar Faruk Chowdhury
 Course: VAT & SD Act in Bangladesh
 Instructor’s Name: Mr. Abdul Mannan Shikder
 Date: December 10, 2024

2. Introduction

 Overview of EFDMS: The Electronic Fiscal Device Management Systems (EFDMS)

is a key initiative by the National Board of Revenue (NBR) in Bangladesh, designed to
enhance TAX & VAT collection and improve compliance with fiscal regulations. The
National Board of Revenue (NBR) of Bangladesh launched the EFDMS in August 2020.
The system involves the use of Electronic Fiscal Devices (EFDs), which are tools used
by businesses for recording sales transactions in real time and submitting this information
to the vat & tax authorities.
 Purpose of the Assignment: The primary purpose of an assignment on EFDMS is to
provide a comprehensive understanding of the system’s functionality, its benefits in
improving tax collection, ensuring compliance, and enhancing transparency in
Bangladesh’s tax system. It also aims to address the challenges in implementation and
propose recommendations for further strengthening the system.
 Importance of EFDMS: The EFDMS in Bangladesh plays a pivotal role in modernizing
the country’s tax system by ensuring better compliance, increasing transparency,
reducing tax evasion, and improving the overall efficiency of tax administration. It also
supports the broader goal of digital transformation in the economy and helps in fostering
economic growth and stability. The system benefits both businesses and the government
by simplifying tax processes, making tax collection more effective, and aligning
Bangladesh with global standards.

3. What is EFDMS?

 Definition: The Electronic Fiscal Device Management System (EFDMS) is a

technological system designed to streamline and modernize tax collection processes,
particularly for businesses subject to Value Added Tax (VAT). It uses Electronic Fiscal
Devices (EFDs) to record and manage sales transactions in real time, transmitting this
data to tax authorities (such as the National Board of Revenue (NBR) in Bangladesh).
The EFDMS aims to improve tax compliance, increase transparency, and reduce tax
evasion by automating the process of recording and reporting financial transactions.
4. Key Features of EFDMS
Real-Time Monitoring of EFDs
o Continuous Device Status Monitoring: Tracks the status of each EFD in real-time.
o Alert System: Sends instant notifications about issues like malfunctions or
connectivity problems.
o Transaction Monitoring: Ensures sales and tax transactions are accurately
recorded and transmitted.
Centralized Control and Configuration
o Device Configuration Management: Allows administrators to configure tax rates
and device settings from a central platform.
o Firmware Updates: Facilitates remote updating of device software.
o Device Activation and Deactivation: Enables easy activation or deactivation of
devices as required.
Data Collection and Reporting
o Transaction Data Logging: Captures and stores transaction data for audits and
compliance verification.
o Tax Reporting: Automates the generation of tax reports for submission to tax
authorities.
o Transaction Audits: Enables auditing of collected transaction data for accuracy
and transparency.
Compliance with Tax Regulations
o Regulatory Compliance: Ensures that EFDs comply with local tax regulations and
standards.
o Digital Signature and Timestamping: Adds authentication and prevents tampering
with transaction data.
o Real-Time Submission to Authorities: Facilitates real-time transmission of sales
and tax data to the relevant tax authorities.
Device and Transaction Security
o Data Encryption: Secures transmitted data to prevent unauthorized access.
o Access Control: Limits user access and permissions based on roles within the
organization.
Device Diagnostics and Troubleshooting
o Remote Diagnostics: Provides remote troubleshooting tools for quick issue
resolution.
o Maintenance Scheduling: Enables scheduled maintenance for optimal device
performance.
Audit and Traceability
o Audit Trails: Tracks all device-related activities for accountability.
o Transaction Reconciliation: Ensures that transaction data matches financial
records and accounting systems.
Multi-Device and Multi-Site Management
o Centralized Control: Manages multiple EFDs across different locations from a
single platform.
o Scalability: Supports the addition of new EFDs as the business expands.
 User-Friendly Interface
o Dashboard and Reporting Tools: Provides a clear overview of performance
metrics and compliance status.
o Customizable Reports: Generates tailored reports for different users, including
auditors, management, and tax authorities.
Integration with Other Business Systems
o Accounting Software Integration: Ensures seamless synchronization with
accounting systems for accurate financial reporting.
o POS and ERP Integration: Connects EFDMS with Point-of-Sale (POS) systems
and Enterprise Resource Planning (ERP) platforms for efficient data management.
User Access and Permissions
o Role-Based Access Control: Controls user access based on predefined roles and
permissions.
o Audit Logs: Tracks user actions for accountability and compliance.
Cloud-Based Management
o Cloud Storage: Stores transaction data and configurations securely in the cloud,
enabling scalability.
o Remote Access: Allows authorized users to access and manage the system from
anywhere.

5. Benefits of EFDMS
 Tax Compliance: Helps businesses comply with tax regulations, reducing the risk of
penalties or fines from tax authorities.
 Operational Efficiency: Centralized management and automation streamline operations
and minimize manual intervention.
 Enhanced Security: Ensures that transaction data is secure and that unauthorized access is
prevented.
 Cost Savings: Reduces the need for on-site visits by technicians with remote diagnostics
and troubleshooting capabilities.
 Improved Transparency: Provides a clear audit trail for every transaction, ensuring
accountability and trust with tax authorities.

6. Challenges and Considerations

 Implementation Costs: Initial setup and integration of EFDMS with existing business
systems can be costly.
 Compliance Updates: EFDMS must be frequently updated to reflect changes in tax laws
and regulations.
 Device Reliability: EFDs must be maintained regularly to ensure consistent performance
and avoid service disruptions.
 Cybersecurity Risks: Although data encryption is implemented, ensuring the security of
transmitted data remains a priority.
7. Implementation of EFDMS in Bangladesh

The implementation of Electronic Fiscal Device Management Systems (EFDMS) in Bangladesh

aims to enhance tax compliance, streamline tax administration, and improve revenue collection
through the use of Electronic Fiscal Devices (EFDs). EFDMS will automate the monitoring and
reporting of transactions, ensuring real-time submission of data to the National Board of
Revenue (NBR) for better oversight and efficiency.

8. Case Studies/Examples in Bangladesh

Retail Sector in Dhaka

Background:
A large retail chain in Dhaka faced challenges in ensuring tax compliance due to manual
invoicing and inconsistent reporting across multiple outlets.

Implementation:

 EFDs were installed at all retail outlets.

 Real-time integration with a cloud-based Electronic Fiscal Device Management System
(EFDMS) enabled automatic transmission of sales and tax data to the National Board of
Revenue (NBR).
 Employees were trained to handle the new system and ensure smooth operations.

Results:

 Improved Tax Compliance: All sales data was recorded accurately and submitted
automatically to the NBR.
 Operational Efficiency: The business reduced time spent on manual tax reporting and
streamlined financial operations.
 Reduced Errors: Automation minimized human error and ensured accurate VAT
submissions.

Small Manufacturing Business in Rajshahi

Background:
A small manufacturing company in Rajshahi had difficulty meeting VAT compliance due
to paper-based invoicing and irregular reporting.
 Implementation:

 The company adopted a simple EFD system integrated with its accounting software.
 Automated VAT reporting: The EFDMS captured transaction data, calculated VAT, and
submitted reports directly to the NBR.

Results:

 Enhanced Compliance: The company successfully met VAT requirements with accurate
and timely tax filings.
 Reduced Operational Costs: The business saved on labor costs for manual reporting.
 Ease of Auditing: With digital records, audits became more efficient and straightforward.

9. Future of Electronic Fiscal Device Management Systems (EFDMS) in

Bangladesh

The future of Electronic Fiscal Device Management Systems (EFDMS) in Bangladesh looks
promising, with several developments expected to enhance tax administration and business
operations:

Wider Adoption Across Sectors:

o As more businesses, especially in sectors like retail, hospitality, and manufacturing,
adopt EFDMS, it will become a standard tool for tax compliance in Bangladesh.
o The government is likely to push for the adoption of EFDMS across various industries,
including SMEs, to improve revenue collection.
Integration with Broader Tax Systems:
o EFDMS will increasingly be integrated with other governmental platforms, such as
customs and accounting systems, enabling seamless data exchange and better
coordination between businesses and the National Board of Revenue (NBR).
o This integration will allow for real-time data transmission, making tax reporting more
accurate and efficient.
Improved Compliance and Revenue Generation:
o As businesses adopt EFDMS, tax evasion will decrease significantly due to automated
transaction reporting, leading to better tax compliance and increased government
revenue.
o The system will ensure that taxes like VAT are automatically calculated and reported in
real-time, reducing human error and fraud.
Technological Advancements:
o EFDMS is likely to benefit from advancements in cloud technology, AI, and data
analytics, providing enhanced capabilities like predictive insights for businesses and tax
authorities.
o Future systems may offer automated reconciliation, smart auditing tools, and real-time
anomaly detection to further improve compliance.
Government Incentives and Support:
o The government may introduce incentives to encourage small and medium-sized
enterprises (SMEs) to adopt EFDMS, including subsidies or low-interest loans to cover
initial costs.
o Training and awareness programs will also play a crucial role in ensuring smooth
adoption across the country.
Expansion of EFDMS Coverage:
o The scope of EFDMS will likely expand beyond urban areas, reaching rural businesses,
with the improvement of infrastructure like reliable internet connections.
o As businesses of all sizes and types adopt the system, EFDMS will become a key tool in
achieving a more transparent, efficient, and digitized economy.

Conclusion:

EFDMS in Bangladesh will play a pivotal role in modernizing the country's tax system, driving
digital transformation, and boosting revenue collection. With advancements in technology,
regulatory support, and increasing business adoption, the future of EFDMS is bright,
contributing to a more compliant and efficient economy.