National Board of Revenue on Thursday said that value-added tax would be applicable only on sales and delivery of some specific costly products and services using social media and virtual businesses.
In a gazette notification issued on the day, NBR said that VAT at a rate of 5 per cent would be applicable on online sale, buy and transfer of car, furniture, air conditioner, freezer, refrigerator, television, washing machine, camera, home theater, gold and diamond ornaments and foreign-brand clothes, footwear etc.
There will also be 5 per cent VAT on advertisement and transport communication like ride sharing services provided through any digital platforms like website, social media, mobile application and other electronic network.
The VAT will, however, be applicable only on the portion which driver or vehicle owner pay to the service providers such as Pathao and Uber as commission.
VAT wing of NBR issued the notification clarifying the definition of social media and virtual businesses as previous definition created confusion between e-commerce and virtual businesses.
NBR, for the first time, in the budget for the upcoming fiscal year 2018-2019 imposed 5 per cent VAT on virtual businesses without a clear distinction between e-commerce and virtual businesses.
According to the NBR, e-commerce or online shopping enjoys VAT exemption if products and services are sold after being collected from a manufacturer or a supplier paying VAT and the business operators don’t have own sales centre or showroom.
Officials of the revenue board said that VAT on virtual businesses would be applicable if the businesses were done by a platform or trader who did not have any sales centre or showroom.
Value-added service provided to telecom operators will not come under the purview of the provision.
They said that VAT would be applicable on total value of the products or services.
There would be standard VAT or 15 per cent on other types of online businesses which did not fall under the two categories, they added.
The NBR first in 2015 imposed VAT on e-commerce businesses and later withdrew it on pressure from stakeholders.
The government this year imposed the VAT on virtual business through the national budget where finance minister AMA Muhith said that with the fast development of internet technology, social media and mobile application platform-based virtual business were booming.
In order to bring these online-based virtual businesses under the tax net a new service code was defined as `Virtual Business’ on which 5 per cent VAT would be imposed, he said.
Entrepreneurs, however, have been demanding withdrawal of the VAT on the sector to help it boom.
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