BRPD Circular Letter No. 03: VAT calculation in case of service charge charged at a reduced rate than chargeable fixed rate by the banks

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Banking Regulation and Policy Department Bangladesh Bank Head Office Dhaka March 23, 2009 BRPD Circular Letter No.- 03 Date ------------------------ Chaitra 09, 1415 Chief Executives All Scheduled Banks in Bangladesh Dear Sir, VAT calculation in case of service charge charged at a reduced rate than chargeable fixed rate by the banks For the information of all concerned NBR's letter No. 8(8) Mushak Ni: O Ba:/99(Angsha-1)/ 403(2) dated February 18, 2009 is reproduced overleaf in to-to. This instruction shall come into force with immediate effect and you are requested to ensure its compliance by all of your branches. Please acknowledge receipt. Yours sincerely, (Abu Hena Mohd. Razee Hassan) General Manager Phone: 7117825

[Translation of the Bengali text follows]

Chief Executive All Scheduled Banks in Bangladesh

Subject: Reproduction of NBR's letter No. 8(8) Mushak Ni: O Ba:/99(Angsha-1)/403(2) dated 18-02-2009.

Reference: 1. Standard Chartered Bank, 67 Motijheel Commercial Area, Dhaka-10, dated 28-01-2009. 2. The Hongkong and Shanghai Banking Corporation Ltd. Anchor Tower, Sonargaon Road, Dhaka-27, dated 28-01-2009. 3. NBR's letter No. 8(8) Mushak-Ni: O Ba:/99(Angsha-1)/326, dated 15-12-2008.

Sir,

With reference to the subject cited above, it has been observed that in cases where banks charge a reduced service charge instead of the standard chargeable fixed rate, VAT is being calculated on the standard chargeable fixed rate rather than on the reduced service charge actually charged to the customer. This practice is contrary to the instruction issued by the National Board of Revenue (NBR) regarding the calculation of VAT on service charges.

Accordingly, please note that in cases where banks charge a reduced service charge instead of the standard chargeable fixed rate, VAT must be calculated on the reduced service charge actually charged to the customer, in accordance with the NBR's instruction reproduced below.

Furthermore, please ensure that the instruction reproduced in paragraphs 1 and 2 is strictly followed by all branches of your bank and that compliance is maintained.

In this regard, please ensure strict compliance.

Enclosed:- [Enclosed with the letter]

Copy for information and necessary action to:

1. The Managing Director, Standard Chartered Bank, 67 Motijheel Commercial Area, Dhaka-10.
2. The Managing Director, The Hongkong and Shanghai Banking Corporation Ltd. Anchor Tower, Sonargaon Road, Dhaka-27.
3. The Additional Secretary, National Board of Revenue, NBR Bhaban, Segunbagicha, Dhaka-1000.

Copy for information to:

1. The Secretary, Ministry of Finance, Economic Division, Bangladesh Secretariat, Dhaka.
2. The Secretary, Ministry of Commerce, Bangladesh Secretariat, Dhaka.
3. The Secretary, Ministry of Law, Justice and Parliamentary Affairs, Bangladesh Secretariat, Dhaka.
4. The Secretary, Ministry of Planning, Bangladesh Secretariat, Dhaka.
5. The Secretary, Ministry of Commerce, Bangladesh Secretariat, Dhaka.
6. The Secretary, Ministry of Finance, Economic Division, Bangladesh Secretariat, Dhaka.
7. The Secretary, Ministry of Law, Justice and Parliamentary Affairs, Bangladesh Secretariat, Dhaka.
8. The Secretary, Ministry of Planning, Bangladesh Secretariat, Dhaka.
9. The Secretary, Ministry of Commerce, Bangladesh Secretariat, Dhaka.
10. The Secretary, Ministry of Finance, Economic Division, Bangladesh Secretariat, Dhaka.
11. The Secretary, Ministry of Law, Justice and Parliamentary Affairs, Bangladesh Secretariat, Dhaka.
12. The Secretary, Ministry of Planning, Bangladesh Secretariat, Dhaka.

[End of Translation]

02| Accordingly, please ensure that the instruction reproduced in paragraphs 1 and 2 is strictly followed by all branches of your bank and that compliance is maintained.

03| In this regard, please ensure strict compliance.

Enclosed:- [Enclosed with the letter]

Copy for information and necessary action to:

1. The Managing Director, Standard Chartered Bank, 67 Motijheel Commercial Area, Dhaka-10.
2. The Managing Director, The Hongkong and Shanghai Banking Corporation Ltd. Anchor Tower, Sonargaon Road, Dhaka-27.
3. The Additional Secretary, National Board of Revenue, NBR Bhaban, Segunbagicha, Dhaka-1000.