VAT via e-fiscal devices hits snags in Ctg as machines fail

The rollout of Electronic Fiscal Devices (EFDs) in Chattogram in 2020, aimed at streamlining VAT collection, is facing serious setbacks, with nearly a quarter of the machines malfunctioning, adding to the declining VAT revenue in the port city. 

EFDs are electronic systems used to track, monitor, and record real-time transactions of sales in business establishments, primarily for tax purposes.

According to Chattogram VAT officials, out of 4,867 installed devices, 1,177 have malfunctioned. Additionally, poor maintenance has led many business owners to discontinue using even functional machines.

The devices face various issues, such as charger and network problems, battery failures, restricted ticket submissions, inability to issue invoices, short battery life, charger unavailability, shutdowns during transactions, and malfunctioning buttons.

Tafsir Uddin Bhuiyan, an additional commissioner of the Customs Excise & VAT Commissionerate in Chattogram, told TBS a joint venture, SZZT-KMMT-Synesis-EATL JV, supplied the first batch of EFDs.

"The devices installed by the venture, 1,817 in total, saw 827 fail within just a year. Each device, imported duty-free from China, cost Tk22,000," he said. 

Despite sending four letters to the joint venture asking them to fix the machines, there was no response, said Bhuiyan, adding that the revenue authority has been informed of the issue and will take further action. 

However, when asked, Omar Khayyam, project manager of KMMT (Kun Ming Movo Technology), said otherwise. 

He told TBS, "We have been repairing the broken EFD machines we've installed. Businessmen can reach our Dhaka call centre for prompt assistance, and we also offer services in Chattogram. We're fixing the machines gradually."

Aminul Bari Shuvro, chief solution officer of Synesis IT Ltd, said, "Our responsibility is limited to the software aspect of the machines; hardware malfunctions fall outside our expertise." 

He added, "We provided the EFDs for the initial phase of the project, while another company is now handling the subsequent installations," he added. 

Tafsir Uddin Bhuiyan said Genex Infosys Limited was tasked with importing, installing, and maintaining EFD machines for the second phase. In return, Genex gets a commission of Tk0.53 for every Tk100 of VAT collected. 

"Genex installed 3,050 EFDs, of which 350 have already broken down," said Bhuiyan, adding that the company has been more responsive than KMMT in repairing the damaged devices.

VAT decline thru EFDs

According to the Customs Excise & VAT Commissionerate, Chattogram, VAT collection through EFDs in August 2020 generated Tk14 crore from 1,192 invoices. By December 2021, this figure rose to Tk33 crore. 

However, as the devices began to malfunction and oversight declined, the collection started to drop.

In January 2023, VAT revenue stood at Tk5.42 crore, and by July 2024, it plunged to Tk1.43 crore. The most recent data, from September 2024, indicate a minor uptick in revenue to Tk1.75 crore, but the situation remains far from ideal.

The fiscal devices are installed in various business establishments, including hotels, restaurants, fast food outlets, sweet shops, beauty parlours, garment stores, departmental stores, jewellers, and gyms. 

These devices are specifically deployed in businesses with annual transactions exceeding Tk50 lakh.

Additional Commissioner Bhuiyan also blamed businesses for non-cooperation in the effective use of EFDs. He told TBS that they held several meetings with businesses to enhance VAT collection through EFDs. "Although we received assurances of support from their side, we have yet to see any effective response."

EFDs were unfairly imposed: Businesses

Local businesses, however, complained of inadequate training, poor communication, and a lack of technical support from VAT officials. Many feel the VAT authorities have shifted all responsibility onto the businesses after installing the devices.

"There's little publicity about how EFDs should be used, and the training provided was insufficient," said a local shop owner. "Moreover, the machines take 3 to 5 minutes to generate a single invoice, which annoys customers. Many customers refuse to wait and do not even want an invoice after paying VAT."

Syed Khurshid Alam, General Secretary of the Bangladesh Shop Owners Association in Chattogram, added, "The burden of VAT collection via EFDs is unfairly placed on shop owners in malls. Until these machines are installed in all eligible businesses, the system will remain inefficient."