VAT automation elusive as Ctg trader reluctant to e-fiscal devices

As part of the government move to ensure value-added tax at the retail level, the National Board of Revenue is in phases installing electronic fiscal devices in different outlets including restaurants, jewellery, clothing shops, beauty parlour and shops in malls and city corporation areas across the country.

Under the Chattogram's Customs, Excise and VAT Commissionerate, one of the large tax-collecting units, the authorities have so far set up 520 devices at 490 outlets.

However, the initiative apparently fails to become a success due to the reluctance of business owners; they do not use the devices most of the time to receive payments from customers. As a result, realising the actual amount of the indirect tax through digitalisation remains elusive.

The electronic fiscal device, commonly known as EFD, is a machine that can calculate value-added and other taxes, preserve sales records, and send them to the central server of the NBR in real-time in an automated way using the internet. The NBR launched a project titled 'VAT online' in 2012 to automate the VAT system. Apart from EFD, ensuring the use of authorised software at the production and corporate level was one of its main goals.

Visiting several outlets in the port city, many of the businesses having EFDs were found collecting product payments on just paper. Hardly have they used the devices.  

Jaman Hotel at Kazir Dewri area is one of the recipients of the devices from the VAT commissionerate. It was found not providing EFD-generated receipts to the customers for several hours on November 9.

Asked about the irregularities, its Manager Md Latif said using EFD was a time-consuming matter. It takes at least 3 to 5 minutes to receive payment using the machine. "It is tough to manage particularly in peak hours. Customers feel bothered by the delay," he said, adding that they, however, received 20-30 payments a day using the machine.

Bangladesh Shop Owners Association Chattogram District General-Secretary Sayed Khurshid Alam told The Business Standard that there were some discriminations in the provision of using EFDs.

Only some shopping mall outlets are being forced to use EFD for ensuring fair VAT collection. On the other hand, there are many shops that were not provided EFDs yet. 

"Besides, many large-scale online businesses are selling a huge number of products every day, they even arrange fairs in five-star hotels in the city. But the businesses were not brought under VAT and EFD coverage," he said.

So, EFD users are being losers in terms of business competitiveness, added Khurshid, saying that the VAT authorities, besides, did not arrange proper training for the shop-owners.

Observing several EFD-equipped outlets, customers were also found avoiding EFD receipts to evade VAT. Some were seen requesting managers not to issue VAT receipts or EFD-generated documents.

Consumers Association of Bangladesh President SM Nazer Hossain said customers were still unaware of VAT payment. Besides, the authorities needed to encourage customers and businesses for the automated VAT. 

He suggested that the authorities should be more active to ensure the EFD uses. 

Commissioner of the Customs, Excise and VAT Commissionerate Mohammad Akbar Hossain said, "We have set up some EFDs in the cities. The number of the machines will be increased in phases."

The machines confirm depositing VAT to the government exchequer. Besides, customers can win the lottery which the NBR draws in every month.

EFD coverage

The Commissionerate, divided into 8 divisions – Agrabad, Chandgaon, Chattala, Rangamati, Patiya, Cox's Bazar, Khagrachari, and Bandarban, enlisted 900 outlets to install the devices in the primary phase. It will increase the shop number in phases, according to the Commissionarate.

The authorities have installed 400 devices in the ongoing year, and 120 the previous year.

Out of 520, 393 were set up in Chattogram city, and 127 were in Cox's Bazar, Bandarban, Khagrachari and Rangamati.

According to the Value Added Tax and Supplementary Duty Act 2012, businesses having an annual turnover of Tk50 lakh or more, have to pay VAT.

However, the VAT authorities declined to disclose the number of total outlets that should mandatorily use EFDs. They said it would take time to cover all of the shops.

Business insiders there said the current number EFD users is just a nominal. The majority outlets did not receive EFD yet.

For example, as of Thursday, 34,289 businesses registered them with the Commissionerate, and received Business Identification Numbers or BIN that is used for VAT payment. According to the law, one-third of the number is supposed to use the devices, said officials.

VAT collection through EFD

Last September, the authorities bagged Tk2.26 crores in value-added tax, which means that per EFD generated around Tk44,000 on an average.  The average sale per machine was Tk4.24 lakh in the month.

However, the actual amount of sales of the outlets were much higher from the figures, according to the Shop owners' body. It said the outlets sold Tk10-30 lakh in the month.