Understanding VAT Refund and Carry Forward Methodology: Eligibility, Conditions, and Timeframes

If a person has paid more than the amount shown as payable tax in the return for a tax period, they are entitled to claim a refund for the excess payment within the prescribed time, terms, and manner, either through an application or by showing it as a decreasing adjustment in the next return.

Before starting to discuss this in detail we first need to know how to calculate the VAT payable.

Basically, the formula used to calculate the net VAT payable is Net VAT Payable = Total Output VAT + Increasing Adjustments - Total Input VAT - Decreasing Adjustments. If the total Input VAT and decreasing adjustments are higher than the output VAT and increasing adjustments, a negative payable amount may be created.

Remedies To Treat Negative Balance

i.?Carry forwarded; or

ii.?Apply for a Refund

Time Period Balance Carries Forward

i. If the economic activity involves construction, house building, land development, or property development – Infinite.

ii.?In relation to other cases – up to the following six (06) periods.

Refund Methodology

In order to initiate the VAT refund process, taxpayers must submit an application to the Commissioner of VAT using a prescribed form known as "Mushak-9.1". The form should contain accurate and detailed information about the taxpayer's business activities, VAT registration, input and output tax calculations, and other relevant details.

After receiving the application, the Commissioner will review and verify the information provided by the taxpayer to ensure that they meet the eligibility criteria for VAT refund. If the Commissioner approves the application, the refundable amount will be deposited directly into the taxpayer's bank account, or a crossed check will be issued in favor of the taxpayer.

It is important for taxpayers to ensure that they provide complete and accurate information in their refund application, as any discrepancies or errors may lead to delays or rejections of the application. Additionally, taxpayers should keep a record of their refund application and follow up with the tax authority if they do not receive their refund within the stipulated time period.

Conditions for Refund Eligibility Include

i.?50% or more Turnover is or will be derived from zero-rated.

ii. 50% or more expenditure on input is on imports or acquisitions used in the manufacture of zero-rated supplies.

iii.?In other cases, the Commissioner is satisfied that the nature of such a person’s economic activity regularly results in excess input tax credits.

iv. If the refundable amount after six months of adjustments is more than 50 thousand, Commissioner may permit further six-month carry forwarding processes if the balance is less than 50 thousand.

The Time of Getting the Refund

The time for receiving the refund amount is three months from the date of application.

Reference

Value Added Tax and Supplementary Duty Act. (2012). Government of the People's Republic of Bangladesh.

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