The quarterly VAT return system was introduced to simplify business operations and reduce the accounting burden on small and medium enterprises (SMEs).
However, within just a few months of its implementation, the government is deciding to make a major reversal in this VAT payment rule.
Although the budget for the current FY27 provided for submitting VAT returns and making payments every three months, it has resulted in a severe collapse in revenue collection in practice.
Due to the new rule, cash is not being deposited into the government treasury on time, directly impacting the government's regular operating expenses.
In the first two months of implementation alone, VAT collection dropped by nearly 20% or Tk crore compared to the same period last fiscal year.
At the same time, the number of institutions submitting returns has also relatively declined.
Amid the country's ongoing situation, the revenue shortfall has created major concerns for the government in meeting necessary social, economic, and energy expenses.
Consequently, to stop public funds from remaining tied up with businesses for long periods and to normalize revenue flow, the National Board of Revenue (NBR) is preparing to swiftly revert to the previous monthly VAT return submission process through an ordinance.
According to NBR data, nearly 38% of total revenue comes from VAT.
In the first two months (July and August) of the current FY27, a total of Tk crore in VAT was collected.
For the current FY27, the NBR's total revenue collection target has been set at Tk crore.
Out of this, Tk crore is to be collected from the VAT sector alone.
Md Ainul Islam, former general secretary of the Bangladesh Economic Association, stated that to make the economy self-reliant in the long run, there is no alternative to increasing the tax-to-GDP ratio. For this, radical changes must be brought to the NBR’s traditional tax collection system.
Rather than imposing new tax burdens on existing taxpayers, the tax net must be expanded significantly.
New emerging sectors of the economy must be brought under the tax net to ensure revenue growth.
To make this entire process successful, it is essential to substantially enhance the institutional and technological capacity of the NBR.