Written by The Banking Post
The National Board of Revenue (NBR) is planning to replace the manual VAT refund mechanism for leather and jute exporters with a fully automated e-VAT system, aiming to improve transparency, reduce revenue risks and speed up the settlement of refund claims.
The proposal would also shift VAT refund processing away from the Duty Exemption and Drawback Office (DEDO). However, the NBR has yet to determine the total amount of outstanding refund claims in the two sectors.
According to an internal NBR note dated July 7, the VAT Implementation Wing proposed scrapping the General Order under the VAT Act that allows manual processing of VAT refunds on raw materials used in leather and jute products through DEDO.
Officials said exporters are already receiving VAT refunds through the online e-VAT platform, where claims are processed automatically using e-Challan data and information from the relevant VAT commissionerates. Maintaining a parallel manual system could make it difficult to verify refund claims and increase revenue risks, they added.
Under the proposal, exporters would receive VAT refunds through their respective VAT commissionerates using the automated e-VAT system.
The note, signed by NBR Member (VAT Implementation and IT) Syed Mushfequr Rahman, also recommends consultations with trade bodies representing the leather and jute sectors before a final decision is taken.
If approved, the move will end the special refund arrangement introduced in March 2023, making the e-VAT platform the sole channel for VAT refunds for exporters in the two sectors.
“We have to process all VAT refunds through VAT returns only, through our e-VAT system. Claimants will receive the refund in their designated bank accounts through IBAS++ after approval by the e-VAT system. No physical contact will be needed,” Rahman said.
He added that since VAT returns are submitted to VAT circles, refunds should be processed by the VAT commissionerates rather than DEDO.
However, DEDO will continue to process refunds of customs duty and regulatory duty through manual verification until those services are automated under the NBR’s Strengthening Revenue Mobilisation Project (SRMP), he said.
A senior customs official said DEDO faces legal hurdles because it does not have access to VAT returns needed to verify refund claims. Ambiguities between the VAT Act and the VAT Rules also limit its ability to process VAT refunds.
Reza-e-Azam, secretary general of the Bangladesh Jute Spinners Association (BJSA), said many jute exporters have long-pending VAT refund claims. As exporters in the sector are exempt from paying VAT, many did not submit nil VAT returns.
He suggested allowing exporters to settle their existing claims through DEDO before shifting entirely to the automated e-VAT system. At the same time, he welcomed the planned automation, saying it would reduce physical visits to tax offices and enable faster refund processing.
