Time-consuming procedures in the VAT provisions are delaying VAT refund process to the United Nations (UN) agencies in Bangladesh.
To avoid the hurdles in refund process, the UN office in Bangladesh has sought upfront VAT exemption status for its agencies here for locally procured goods and services for official use and project implementation.
The United Nations Resident Coordinator in Bangladesh Mia Seppo in a recent letter to the Ministry of Foreign Affairs secretary expressed her concern over the complexities in refund process in the Duty Exemption and Drawback Office (DEDO).
She alleged that the DEDO has not processed and reimbursed VAT claims of the UN agencies since July 2019.
In a letter, dated October 4, she said the UN agencies are recording huge VAT receivables from the government for not getting VAT reimbursement.
The UN office in Bangladesh sent copies of the letter to the National Board of Revenue (NBR) chairman and the DEDO director general.
Ms Seppo termed the time-consuming procedures and six months' limited time for claiming refund as hindrances.
The UN agencies are incurring financial loss for not being able to submit substantial requests to the DEDO for VAT reimbursement after payment to vendors.
She requested the government to address the concerns and speed up the process of VAT refund.
However, talking to the FE, Director General of DEDO Tasmina Hossain said they are expediting reimbursement procedures for the UN agencies. "We have already processed some 40 cheques, and the UN agencies will get refund shortly."
On delay in reimbursement, she said there were a huge backlog of refund claims, which the DEDO has already processed.
In new VAT and Supplementary Duty Act 2012, the government at first incorporated a provision to issue refund to all of the VAT-payers from field level VAT offices.
Later, the NBR has empowered DEDO to give refund to the UN agencies and other privileged organisations by amending the law.
The UN agencies have applied for refund in the field-level VAT offices, and later the applications have been transferred to the DEDO for resolving the ambiguities, she also said.
As per compliance with the convention on the Privileges and Immunities of the United Nations and United Nations Development Assistance Framework (UNDAF), Bangladesh permits the UN agencies to claim VAT refund on locally procured goods and services.
Until July 1, 2019, all of the VAT-payers submitted VAT reimbursement claims to the DEDO to get refund of the paid VAT on procurement.
As per the VAT law, privileged organisations are exempted from payment of VAT on many services, including fuels for their vehicles and furniture etc.
They are entitled to get refund of the VAT that they paid at the time of availing services or purchasing products.
Section 68 to 72 of the new VAT law has a clear direction on the refund process. Section 71 of the law has stated the refund giving process for diplomats and international organisations.
Some field-level officials said they do not have expertise or sector specialties to give refund of the paid VAT to exporters and privileged organisations.
The DEDO has expertise to process and dispose of VAT refund applications. Under the new VAT law, it is empowered to give customs duty refund too, officials noted.
However, the refund of customs duty remained halted, as the NBR will have to devise a separate policy for issuing the refund, they added.
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