Online marketplaces may be exempted from VAT challans

Online marketplaces are expected to receive an exemption from the mandatory collection of invoices for value-added tax, known as VAT challans, for sales made on their sites starting from the next fiscal year.

Finance ministry officials have said the government plans to introduce a definition of online marketplaces, along with specifications, in the upcoming budget.

The introduction of the measure will result in the exemption of online marketplaces from the mandatory collection of VAT challans, with the aim of attracting increased foreign direct investments (FDIs) in the sector.

The officials further said starting in the new fiscal year, e-commerce companies will only be required to pay VAT on their service commissions. If the platforms are engaged in selling goods, sales VAT will be applicable, and the companies will be responsible for paying their VAT on their sales.

Sector leaders have welcomed the initiative and said it will create an opportunity to reduce harassment and encourage entrepreneurs to further invest in the sector. They also requested the government to withdraw 15% VAT on delivery charges for the sector to grow.

Currently, online marketplaces are responsible for taking VAT liabilities on every digital sale using their sites, even if they are not selling the goods and services. Sometimes, National Board of Revenue (NBR) officials even ask for a VAT challan for every sale.

Bangladesh's e-commerce is growing very fast and has huge potential for both local and global investors. The e-commerce market size was Tk22,000 crore in FY22, according to the e-Commerce Association of Bangladesh (e-CAB). The market sees 25% annual growth on average.

The country has also witnessed rapid growth in e-commerce transactions, with the amount reaching Tk16,000 crore at the end of 2021, according to e-CAB, which predicts the market size will reach Tk30,000 crore at the end of 2030.

Talking with The Business Standard, AHM Hasinul Quddus (Rusho), chief corporate affairs officer at Daraz, said introducing a definition will boost entrepreneurs' confidence to further invest in this sector. 

Also, it will help online marketplaces become compliant as per laws, he said, adding, "Currently, we are bound to collect VAT challans on all sales and pay a 5% VAT on our commission."

"Collecting and reserving thousands of VAT documents on sales is quite difficult for marketplaces as we are not entitled to get them," he added.

Marketplaces are always working as a bridge between sellers and customers, Rusho said, adding that if any marketplace acts as a seller in that case, they can reserve VAT challan copies.