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4 Easy Steps to Calculate your Tax & VAT from Bill.
by fm_skill_sharing
Taxation of goods and services is a complex and diverse area, with a range of
methods and systems in place around the world. In the Bangladesh, taxation of
goods and services is based on the Income Tax Act, 2023 & Value Added Tax &
Supplementary Duty Act 2012. This means that tax is levied on the final purchase
price of goods.
One of the main tax systems in place in the Bangladesh is the value-added tax
(VAT). This is a tax that is levied on the value added (i.e., the difference between
the price of goods and the cost of the goods’ ingredients.) In practice, it is found
that a VAT registered supplier have to follow government regulation to supply
product or service. But an unregistered supplier not willing to follow government
regulation because they are not used to VAT culture or some of them don’t how
to calculate VAT. In this blog you will learn 4 Easy Steps to Calculate your Tax &
VAT from Bill.
Here the question is Who will deduct VAT & Tax from Bill? What do you
mean base amount? How many types of Tax & VAT related bill found in
practice?
I will help you answer all these question in this post. You’ll get a practical
insight on how to calculate tax & VAT from bill. Just follow & utilize this &
boost your productivity. Let’s start.
1. Who will deduct VAT & Tax from Bill?
Answer:
VAT Deduction Reference
S.R.O No.240-AIN/2021/163-VAT
Page 1 of 11
The National Board of Revenue has enacted the following rules in accordance with
the provisions of Section 135, Section 49 and Section 127(b) of the Value Added
Tax and Supplementary Duty Act, 2012 (Act No. 47 of 2012), namely: –
In accordance with sub-rule (1) (b) of rule 2 VAT withholding entity
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Any government or any of its ministries
Department,
A semi-public or autonomous body
State-owned enterprises
Local authorities
Council or similar body
Non-governmental organizations approved by the Bureau of NGO
Affairs or the Department of Social Services
Any bank, insurance company or similar financial institution
Secondary or higher-level educational institutions and
limited company
Tax Deduction Reference
Income Tax Act 2023, Section-104 (3)
The Specified Person means(a) any company, firm, association, trust or fund;
(b) Public-Private Partnership
(c) any foreign contractor, foreign enterprise or association or organization
established outside Bangladesh;
(d) any hospital, clinic or diagnostic centre;
(e) any e-commerce platform having an annual turnover of more than one
crore taka, other than any specified person, by whatever name called;
(f) hotels, community centers, transport agencies with an annual turnover of
more than one crore taka;
(g) any person other than a farmer engaged in the production and supply of
tobacco leaves, cigarettes, bidis, jorda, gul and other tobacco products;
2. What do you mean base amount? (See Page# 10 for explanation)
Answer:
“Base amount” means the higher of the –
1. Contract Value; or
2. Bill or Invoice Amount; or
3. Payment;
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3. How many types of Tax & VAT related bill found in practice?
There are three types of Tax & VAT Inclusive or Exclusive related bill found in
practice.
1. Bill Inclusive VAT & Tax
2. Bill Exclusive VAT & Inclusive Tax
3. Bill Exclusive VAT & Tax and
4. Bill Inclusive VAT & Exclusive Tax (These types of conflicted bill found rarely).
1. Bill Inclusive VAT & Tax
When any bill attaches this condition “VAT & Tax Inclusive or Tax & VAT as per
government rule” It’s means final consumer have to pay VAT & Supplier required
to pay tax.
Here attached a demo supply bill for calculated VAT & Tax
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Calculation Process
There are four steps you should memorized.
Step-1 VAT deduct from bill.
Above mention bill included a term “Including Tax & VAT”. So we have to
calculate & deduct VAT as Law (S.R.O No.240-AIN/2021/163-VAT). This bill treated
as supply. VAT rate @ 7.5%.
[N.B – If you are confused to treated a bill for supply, you have to collect
supplier BIN Certificate to identify nature of this bill.]
Demo BIN Certificate
Bill Amount = tk. 61,800
VAT = 61,800 x 7.5/107.5 = 4,311.63 or tk. 4,312
So, you must deduct VAT tk. 4,312.
Step-2 Calculate Base Value.
Base Value = Bill Amount – Value Added Tax
= 61,800 – 4,312
= tk. 57,488
Step-3 Calculate Tax Amount from Base Value.
Tax = Base Value x Rate of Tax
= 57,488 x 3% (Section-89, Rule-3)
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= tk. 1,725
Step-4 Calculate Payment Amount.
Payment = Base Value – Tax
= 57,488 – 1725
= tk. 55,763
2. Bill Exclusive VAT & Inclusive Tax
In practice you have found some supply bill attached this condition “VAT
Exclusive & Tax Inclusive” Though the final consumer will bear VAT but it’s
separated from bill not included in bill amount & Supplier required to pay tax.
Here attached a demo supply bill for calculated VAT & Tax
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Calculation Process
There are three steps you should memorized.
Step-1 VAT Directly Calculate on Bill Amount
Above mention bill included a term “Exclusive VAT & Inclusive Tax”. If any bill
attached above term, you should always treat as bill amount = base value. So,
we have to calculate & deduct VAT as Law (S.R.O No.240-AIN/2021/163-VAT). This
bill treated as supply. VAT rate @ 7.5%.
Bill Amount = Base Value
Base Value = tk. 98,000
VAT = 98,000 x 7.5%
= tk. 7,350
So, you must deduct VAT tk. 7,350.
Step-2 Calculate Tax Amount from Base Value.
Tax = Base Value x Rate of Tax
= 98,000 x 3% (Section-89, Rule-3)
= tk. 2,940
Step-3 Calculate Payment Amount.
Payment = Base Value – Tax
= 98,000 – 2,940
= tk. 95,060
3. Bill Exclusive VAT & Tax
In practice occasionally you have found some supply bill attached this
condition “Exclusive VAT & Tax” This type of condition arises from customer &
supplier verbal or written agreement. This bill specialty is Bill amount = Payment
amount. VAT & TAX calculated on gross up method. It’s seeming to be bear VAT
by final consumer & Supplier must pay tax but Local Practice it’s called “VAT &
TAX bear by the company”.
Page 6 of 11
Here attached a demo supply bill for calculated VAT & Tax
Calculation Process
There are three steps you should memorized.
Step-1 Tax Amount Calculated on Gross up Method:
Above mention bill included a term “Exclusive VAT & Tax”. If any bill attached
above term, you should calculate Tax amount on gross up method.
Here
Bill Amount = Payment Amount
Payment Amount = tk. 98,000
Tax = Payment Amount x Tax Rate/(100-Tax Rate) (Section-141)
= 98,000 x 3/97
= tk. 3,031 [Tax Rate–(Section-89, Rule-3)]
So, you must deduct Tax tk. 3,031.
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Step-2 Calculate Base Value.
Base Value = Payment Amount + Tax
= 98,000 + 3,031
= tk. 101,031
Or,
Base Value = Payment Amount x 100/ (100-Tax Rate)
= 98,000 x 100/ (100-3)
= 98,000 x 100/97
= tk. 101,031
Step-3 VAT Amount Calculate on Gross up Method.
VAT = Base Value x VAT Rate
= 101,031 x 7.5% (As per S.R.O No.240-AIN/2021/163-VAT).
= tk. 7,577.32
Step-4 Calculate Actual Bill Amount.
Actual Bill Amount = Base Value + VAT
= 101,031 + 7,577.32
= tk. 108,608.32
4. Inclusive VAT & Exclusive Tax
In practice rarely you have found some supply bill attached this
condition “Inclusive VAT & Exclusive Tax” This type of condition arises from
supplier end due to ignorance of Tax & VAT Law. It is not possible to calculate this
type of bill. Here two questions arise. (a) Which one (Tax & VAT) I calculate first?
(b) Is base value same if we calculate according to the condition “Inclusive VAT &
Exclusive Tax”. Let’s find out answer.
Step-1 Tax Amount Calculated on Gross up Method:
If any bill attached this term “Exclusive Tax”, you should calculate Tax amount on
gross up method.
Here
Bill Amount = Payment Amount
Payment Amount = tk. 98,000 [Let’s Bill Amount = 98,000]
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Tax = Payment Amount x Tax Rate/(100-Tax Rate)
= 98,000 x 3/97
= tk. 3,031 [Tax Rate–(Section-89, Rule-3)]
So, you must deduct Tax tk. 3,031.
Step-2 Calculate Base Value.
Base Value = Payment Amount + Tax
= 98,000 + 3,031
= tk. 101,031
Or,
Base Value = Payment Amount x 100/ (100-Tax Rate)
= 98,000 x 100/ (100-3)
= 98,000 x 100/97
= tk. 101,031
Step-3 VAT deduct from bill.
If any bill found this term “Inclusive VAT”. So we have to calculate & deduct VAT
as Law (S.R.O No.240-AIN/2021/163-VAT). Let’s this bill treated as supply. VAT rate
@ 7.5%.
Bill Amount = tk. 98,000
VAT = 98,000 x 7.5/107.5 = tk. 6,837
Step-4 Calculate Base Value.
Base Value = Bill Amount – Value Added Tax
= 98,000 – 6,837
= tk. 91,163
(a)Answer: If you found this type of bill you contract with supplier for changing the
bill either “Inclusive VAT & Tax” or “Bill Exclusive VAT & Inclusive Tax”. If
supplier deny to do that you can deduct TAX & VAT both inclusive method.
(b) If we calculate according to the condition “Inclusive VAT & Exclusive
Tax” base value is not same.
Page 9 of 11
Extract from Page No 27, 28 & 29
Explanation of Base Value/amount
Page 10 of 11
Thank you
Abu Taeb
ITP, CA Professional level
Mail: taeb.amc@gmail.com
01736440044
Source: Link: https://fmskillsharing.com/4-easy-steps-to-calculate-your-tax-vat-from-bill/
Paripatra 2016-17: https://nbr.gov.bd/uploads/paripatra/16.pdf
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