All port authorities of the country would have to deduct value-added tax at the rate of 15 per cent on charges and fees received from port users for providing any type of services directly or indirectly related to settlement of import-export consignments.
VAT wing of the National Board of Revenue on Wednesday issued a letter to the Chittagong Port Authority asking it to deduct the VAT properly and deposit to the government exchequer.
Officials of the board of revenue said that VAT wing issued the clarification after the CPA on November 16 sought directives from the NBR on applicability of VAT from services.
Currently, CPA and other ports provide 60 types of specific services.
From these, CPA deducts the VAT on fees and charges only for 25 services including port dues, pilotage fee, night navigation fee, shifting fee, tugs, unberthing, berth occupancy, mooring occupancy, water supply charges, jetty crane charges, passenger toll, quay gantry crane charge for container handling, demurrage charge on rail wagon, sorting charge, toll charge, fire service charge, hire of slipway, dredger, miscellaneous gears, salvage and diving charges, issue of certificate, license charge and LCL cargo and container handling charge at Inland Container Depot at Kamlapur in Dhaka.
NBR letter, signed by its second secretary (VAT law and rules) Md Mashiur Rahman, stated that CPA and other ports would have to deduct the VAT from the remaining 35 services and other services not defined in VAT law but are being provided in exchange of fees and charges.
It said that all types of direct and indirect activities related to storage and preservation of import-export goods at port areas, scanning services to goods and all activities related to settlement of goods would be included under the definition of port services.
CPA informed NBR that it operated four types of activities—delivery from outer-anchorage, direct delivery from hook point, overside delivery and delivery from CFS shed, general shed, heavy shed and yard after storage and preservation of goods.
Of these, only delivery from CFS shed, general shed, heavy shed and yard after storage and preservation of goods is related to port services, it said.
In a letter to the NBR, CPA said that it had been deducting VAT on 25 services in line with two instructions of the NBR issued in 1999 and 2004 and they were yet to get any instruction on deduction of VAT from the remaining 35 services.
Imposition of VAT on all services would also increase the cost of import and export affecting the overall cost of doing business, it said, adding that the decision would also create impediments in the efforts of CPA in increasing the tariff value for port services.
Officials of the NBR said that all services under the port authority as VATable in the budget for the fiscal year 2014-2015.
‘VAT at the rate of 15 per cent is applicable on the services provided by the CPA as these are included within the jurisdiction of VATable services,’ the letter stated.
The NBR also instructed its six customs houses including Chittagong and 12 Customs VAT, Excise and VAT Commissionerates across the country to ensure deduction of VAT from the services and deposition to the state coffer.
It is an issue of urgently consideration as it has involvement of huge amount of government revenue, NBR said.
NBR officials said that Chittagong VAT commissionerate had already demanded the outstanding dues since FY2015 from the CPA.
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