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Example of VAT Math

1. Net VAT payable

XYZ Ltd. is a public Limited company. In July, they have -
 Imported raw material from Thailand through bill of entry where Tk 500,000 paid as
VAT and 100,000 as advance tax to the customs authority.
 Purchased other materials about Tk 3,000,000 where 1,000,000 paid through cheque
and remaining will be paid through six installments from M/S. Kader Enterprise under
LTU-VAT.
 M/S J&J Trade Promotions, a sole proprietorship business, have provided
advertisement services about Tk 500,000 paid in cash.
 Paid last three months electricity bill about Tk 100,000 through the banking channel of
Palli Bidyut Samiti.
 Sold goods with 300 invoices amounting value of 20,000,000 to different buyers. The
total amount of goods returned were Tk 225,000 refunded to customers after deducting
Tk 25,000.
 The company conducted their business under VAT Act 1991 and year ended June 30
having a positive balance of VAT current account about Tk 2,500,000. Since no past
due or unresolved cases against them commissioner has issued an attested VAT form
18.6 for adjustment under the new act.
Determine the net tax for this period.

Solution#1: Calculation of net VAT

 Output Tax (OT)
20,000,000 x 15/115 = 2,608,695.65
 Input Tax (IT)
VAT paid at Customs = 500,000
M/S Kader Enterprise = 3,000,000 x 15/115 = 391,304.35
M/S J&J Trade Promotions = 500,000 x 15/115 = 65,217.40
Input tax on electricity bill = 100,000 x 15/115 = 13,043.50
Total = 969,565.25 – 65,217.40 = 904,347.85
 Increasing Adjustments (IA)
VDS from J&J = 65,217.40
 Decreasing Adjustments (DA)
AT = 100,000
GR = (225,000 - 25,000) x 15/115 = 26,086.96
 Net Tax = OT – IT + IA – DA
= 2,608,695.65 - 904,347.85 + 65,217.40 - 126,086.96 = 1,643,478.24

2. Total tax and charges

Government levied 25% Custom Duty (CD), 5% Regulatory Duty (RD), 20% Supplementary
Duty (SD), 15% VAT, 5% Advance Tax (AT), 5% Advance Income Tax on Product A. The
invoice value and assessable value (AV) at the import stage was Tk 45,000 and Tk 50,000
respectively. Assess the applicable Tax and Charges in the importing stage.

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Solution#2

Tax Base Value Formula Base Value Rate Tax and Charges

CD AV 50,000 25% 12,500

RD AV 50,000 5% 2,500
SD AV+CD+RD 65,000 20% 13,000
VAT AV+CD+SD+RD 78,000 15% 11,700
AT AV+CD+SD+RD 78,000 5% 3,900
AIT AV 50,000 5% 2,500
Total Tax and Charges 46,100

3. Partial tax credit

A registered company makes total sales Tk 7,500/- consisting of taxable Tk 7000 supplies. The
total amount of input tax is paid Tk 850/-. What will be the amount of creditable input tax?

Solution#3
Total amount of input Tax, I = 850
Total Taxable Supply, T = 7,000
Total Supply, A = 7,500
Therefore,
Partial Input tax Credit = I x T/A
= 850 x 7,000 / 7,500 = 850 x 0.9333 = 793.33

4. Each stage VAT

Manufacturer: A shampoo manufacturer buys material for shampoo at Tk 20 where Tk 3 vat
is included. The manufacturer sells this at Tk30.He pays vat of Tk 6 which is 20% of Tk30.

Distributor: A shampoo distributor buys shampoo at Tk 36 where Tk 6 vat is included. He

wants to sell this at Tk50. At this stage, he pays Tk 10 which is 20% of Tk 50. So the selling
price becomes Tk 60.

Wholesaler: A shampoo wholesaler buys shampoo at Tk 60 where Tk 10 vat is included. He

wants to sell this at Tk 80. At this stage, he pays Tk 16 which is 20% of Tk 80.So the selling
price becomes Tk 96.
Determine each stage VAT:

Solution#4
Input VAT on input Value Output VAT on output Net
Stage
price price addition price price VAT
Manufacturer 17 3 10 27 6 3
Distributor 36 6 14 50 10 4
Wholesaler 60 10 20 80 16 6

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5. VAT on Supplies
Suppose a taxpayer supplies product of Tk 2,000,000 using 500 invoices. Tk 100,000 of
products are exported by 5 invoices whereas exempted products of Tk 500,000 are supplied
using 100 invoices. He paid tax at the standard rate. What will be his payable tax?

Solution#5

Nature of Supplies Price (A) SD (B) VAT (C)

Zero-rated Direct export -

Goods/Services Deemed export 100,000 -
Exempted Goods/Services 500,000
Standard rated Goods/Services 1,400,000 - 182,608.70
Maximum Retail Price
Fixed-Rate base Goods/Services
Rate for Goods/Services other than
Standard Rate
Retailer/Whole seller/Trader base supply
Total selling Price and total payable tax 182,608.70

6. Cost sheet
At 30 June 2018 the information regarding production and sales of Shova Enterprise Ltd. are
as follows:-

Particulars BDT
Purchase of Raw Materials 200,000
Net wages 50,000
Excess Industrial Expenditure 50,000
Excess Administrative Expenditure 60,000
Expenditure for Sale 40,000

The company sells all of its goods adding 25% profit with total expenditure. Its starting stock
of raw materials and ending goods are Tk 60,000 and Tk 40,000 respectively. The quantity of
ending stock goods and raw materials are Tk 80,000 and Tk 20,000 respectively. If VAT is
imposed @ 15%, calculate the total amount thereof.

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Solution#6
Particulars BDT
Opening Stock of Raw Materials 60,000
Add: Purchase of raw materials 200,000
Less: Closing stock of raw materials (20,000)
Add: Net wages 50,000
Prime cost 290,000
Add: Excess Industrial Expenditure 50,000
Excess Administrative expense 60,000
Expenditure for sale 40,000
Add: Opening stock of finished goods 40,000
Less: Closing stock of finished goods (80,000)
Cost of Sale 400,000
Add: Profit @25% on cost 100,000
Selling Price 500,000

Calculation of Net VAT:

Output VAT 500,000 @ 15% 75,000
Less: Input VAT 240,000 @ 15% 36,000
39,000

7. Selling price determination

ABC Ltd. provides the following information about its production and sales:

Particular BDT
Purchase of raw materials (Including VAT Tk. 300,000) 2,300,000
Direct wages 250,000
Electricity (Including VAT Tk. 3,000) 63,000
Telephone (Including VAT Tk. 1500) 11,500
Depreciation of machinery 30,000
Other production overhead 40,000
Other administrative overhead 70,000
Selling expenses 20,000

The company sells its products by adding a 25% margin on cost. A trade discount of 5% is
allowed. Other production and administration overheads and selling expenses do not include
any VAT. There were no opening & closing stock of raw materials.

Requirement: Determine VAT payable if the rate is 15%, assuming that the opening & closing
stock of finished goods were Tk 30,000 and Tk 20,000 respectively.

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Solution #07
ABC Limited
Calculation of net tax
Particulars Tk
Opening raw material -
Add: Purchasing of raw material (excluding VAT) 2,000,000
Less: Closing Stock of raw material -
Raw material used 2,000,000
Add: Direct labor/wages 250,000
Prime Cost 2,250,000
Factory Electricity 63,000
Telephone 11,500
Depreciation of machinery 30,000
Other production overhead 40,000
Factory Cost 2,394,500
Add: Opening Stock of finished goods 30,000
Less: Closing stock of finished goods (20,000)
Manufacturing Cost 2,404,500
Selling Expense 20,000
Other administration overhead 70,000
Total cost 2,494,500
Add: Profit @ 25% margin on cost 623,625
VAT imposable price 3,118,125
Add: VAT @ 15% 467,719
Less: 5% Rebate (155,906)
Selling Price 3,429,938

Net VAT = Output VAT - Input VAT

= 467,719 - (30,000 + 3,000 + 1,500)
= 163,219

8. Journal entries
1. Purchases: Tk 115
2. Sales: Tk 230
3. Goods returned from customers: Tk 57.50
4. Goods returned to the supplier: Tk 57.50
5. Discounts allowed: Tk 11.50 [Credit note]
6. Discounts received: Tk 17.25 [Credit note – supplier]
7. Allowable expenses: Tk 23,000
8. Bad debts (Input Tax): Tk 115
9. Bad debts recovered: Tk 57.50
10. Entertainment expenses to suppliers: Tk 500 (Blocked input – Input Tax not allowed)

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11. Entertainment expenses to employees, existing customers: Tk 300 (Blocked input –

Input Tax not allowed)
12. Import services (reverse charge): Tk 34,500

Solution#08
S/L No. Journal Entries Tk Tk
1 Purchases 100
Input tax 15
Trade creditors 115
2 Trade debtors 230
Sales 200
Output tax 30
3 Output tax 7.50
Return inwards 50
Trade debtors 57.50
4 Trade creditors 57.50
Return outwards 50
Input tax 7.50
5 Output tax 1.50
Discount allowed 10
Trade debtors 11.50
6 Trade creditors 17.25
Return outwards 15
Input tax 2.25
7 Rental expenses 20,000
Input tax 3,000
Bank 23,000
8 Bad debts 100
Input tax 15
Trade debtors 115
9 Bank 57.50
Bad debt recovered 50
Output tax 7.50
10 Entertainment expenses 500
Bank 500
11 Entertainment expenses 300
Bank 300
12 Service fees 30,000
Input tax 4,500
Amount owing to HQ (Outside BD) 30,000
Output tax 4,500

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9. Net VAT determination

M/S Zibon Corporation (ZC) is an enterprise registered with LTU-VAT and have a different
type of business activity.
 Imported raw materials from Taiwan paying VAT of Tk 300,000, Advance Tax of Tk
60,000.
 Purchased raw materials from Zaraa fashions Ltd. (a company enlisted with DSE)
having a value of Tk 2,500,000 and paying cash 500,000 and remaining amount will be
settled one-year deferred payment.
 Sold goods with 250 invoices amounting value of 5,000,000 to different buyers. Out of
250 buyers, 3 buyers returned some goods having a total value of Tk 300,000.
 Purchased another type of raw materials from a registered proprietorship firm MS Jahid
Traders having a value of Tk 200,000 and payment is done through a certified cheque.
All these transactions are performed in a particular tax period. Calculate net VAT for the tax
period.

Solution#09:
Calculation of net VAT
 Output Tax (OT)
Total Taxable sales x 15/115 = 5,000,000 x 15/115 = 652,173.90
 Input Tax (IT)
VAT at import = 300,000
From ZFL = 2,500,000 x 15/115 = 326,086.96
From JT = 200,000 x 15/115 = 26,086.96
Total = 652,173.92
 Increasing Adjustments (IA)
No VDS
 Decreasing Adjustments (DA)
AT = 60,000
GR = 300,000 x 15/115 = 39,130.43
 Net Tax = OT – IT + IA – DA
= 652,173.90 - 652,173.92 - 39,130.43 = (39,130.45)

10. VAT on different stages

An importer imported 100 pieces of Motorcycle at C&F price Tk 80,000 per piece. The clearing
and incidental charge amounted to Tk 90,000 for the lot. He sold 90 pieces of the cycle to a
wholesaler at a margin of 10% exclusive of VAT which is 15% on the value of sale price. The
wholesaler charged 15% commission to sell it to a retail seller to be sold from their sale center.
The retailers incur cost @ 1,000 for maintenance and salary of persons of sale center and charge
cost plus 10% margin.

Requirement: Compute VAT assuming that retailers sold 70 pieces of the cycle in the month
of December 2018.

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Solution#10
Import Stage:
Particulars Tk
CIF value/imported price (100X80,000) 8,000,000
Add: C&F charge 90,000
Cost of 100 pieces 8,090,000
Cost of 90 pieces (8,090,000 X 90/100) 7,281,000
Add: Profit @ 10% of Tk 7,281,000 728,100
Selling price excluding VAT 8,009,100
Add: Output VAT of 90 Pcs @15% 1,201,365
Selling price including VAT 9,210,465
Wholesaler Stage:
Particulars Tk
Cost of purchase 9,210,465
Less: Input VAT (1,201,365)
Purchase price excluding VAT 8,009,100
Add: Commission @ 15% 1,201,365
Selling price excluding VAT 9,210,465
Add: Output vat @ 15% 1,381,570
Selling price including VAT 10,592,035
Retailer Stage:
Particulars Tk
Cost of 90 Pieces 10,592,035
Cost of 70 Pieces (10,592,035 X 70/90) 8,238,249.25
Less: Input VAT (1,381,570 X 70/90) (1,074,554.25)
Purchase price of 70 pieces excl. VAT 7,163,695
Maintenance (1000 X 70) 70,000
Total cost 7,233,695
Add: Profit @10% 723,370
Selling price excluding VAT 7,957,065
Add: Output VAT of 70 Pcs @ 15% 1,193,560
Selling price including VAT 9,150,624
Working:
Particulars Importer Wholesaler Retailer
100 Pcs 90 Pcs 70 Pcs
Output VAT 1,201,365 1,381,570 1,193,560
Input VAT (1,201,365) (1,381,570)
Input VAT credit @ proportionate basis (1,201,365) (1,074,554)
VAT payable (Net VAT) 1,201,365 180,205 119,005
VAT payable for 70 units 934,395 140,159 119,005
Total VAT for 70 pcs = 934,395 + 140,159 + 92,560
= 1,193,560

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Alternative:

Input Price Other Amount of Output Price Net VAT

Stage of Units Input VAT Output VAT
for units Expenses Value for units payable for
Business Sold (Taka) (Taka)
sold(Taka) (Taka) Addition sold(Taka) 70 units
Importer and
Manufacturer 90 7,281,000 - 728,100 8,009,100 - 1,201,365 934,395
Wholesaler 90 8,009,100 - 1,201,365 9,210,465 1,201,365 1,381,570 140,159
Retailer 70 7,163,695 70,000 723,370 7,957,065 1,074,554 1,193,560 119,005
1,193,560

11. Advise on VAT invoice and credit

Question (a)
In early June 2019, XY Ltd. offered to provide some engineering consultancy services to AB
Ltd. at Tk 850,000 which is the lowest bid price. Another bidder quoted Tk 1,000,000. XY Ltd.
has not attained VAT registration. AB Ltd. intends to hire the services of XY Ltd., being
cheaper. PQ Ltd., a security service provider appointed by AB Ltd. i.e. 1 June 2015, is
registered with VAT authority. PQ Ltd. is unwilling to issue a valid VAT invoice (VAT 6.3)
and has asked the Company to deduct VAT at source from the amount payable thereto. In this
situation, AB Ltd. is not sure whether deduction of VAT at source would be sufficient
compliance with the provisions of VAT laws.
Requirement: Advise AB Ltd. with consequences, if any, for entering into the above
transactions.

Question (b)
AB Ltd. is now negotiating a deal with ST Ltd. for purchasing television sets. AB Ltd. intends
that ST Ltd. deliver the television sets to CD Ltd., a dealer of AB Ltd. wants that ST Ltd. issues
VAT 6.3 challan in favor of ST Ltd. so that they would be able to get input tax credit on the
purchase.
Requirement: Advise AB Ltd. on the above.

Solution#11
Answer (a)
As per VAT Act 2012, no person would be able to take part in any tender if he is not registered
with the VAT Authority or any work order cannot be issued in favor of him. A company cannot
purchase anything from a VAT unregistered entity and even cannot pay if any purchase occurs
accordingly. Moreover, as per Section 46 of the VAT Act 2012, input VAT credit shall not be
allowed on any purchase if anybody makes the purchase from any person not registered with
the VAT authority.
In the given situation, XY Ltd., the lowest bidder to provide the engineering consultancy
services to AB Ltd., is not registered with the VAT authority. As per Section 46 of the VAT
Act 2012, a registered person shall be entitled to an input tax credit against the Value Added
Tax imposed on a taxable supply or a taxable import. Therefore, it is advisable to hire the
consultancy services from an entity registered with VAT authority instead of XY Ltd. to avoid

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the negative consequences as mentioned above. AB Ltd. should include a provision of

mandatory submission of a copy of the VAT Registration Certificate by intended local
suppliers in its vendor enlistment policy and ensure availability of valid VAT 6.3 before
receiving a commercial invoice from suppliers.
However, in the event AB Limited enters into the transaction with XY Limited, the invoice of
XY Limited should be considered as inclusive of VAT as per Section 15 VAT Act 2012. AB
Limited has the responsibility of determining the applicable withholding VAT by back-
calculation (i.e. multiplying invoice amount by 15/115). In this case, the VAT amount becomes
Tk 110,870 (Tk 850,000X15/115). AB Limited will be required to deduct the applicable VAT
at source before making payment and deposit the same to the Government exchequer within
15 working days of deduction.
The same process will apply if AB Limited hires the service from the other bidder and the
bidder does not mention VAT amount separately in the issued VAT 6.3. However, since XY
Limited is unregistered, it appears that they did not consider VAT from its fee. In such case,
AB Limited would be required to bear the applicable VAT (i.e. Tk 110,870) from its own
exchequer.
A company has the responsibility of deduction of VAT at source if it takes supply from VAT
unregistered entity deposit to exchequer using the relevant Commissioner Code within 15
working days of deduction. However, as per Section 46 of the VAT Act 2012, input VAT credit
shall not be allowed on any purchase without availability of valid VAT invoice (i.e. VAT 6.3).
Therefore, merely the deduction of applicable amounts of VAT would not be sufficient to avoid
the negative consequence of loss of input VAT credit.
In the given situation, PQ Ltd., as appointed by AB Ltd. to provide security service, is unwilling
to issue the valid VAT invoice (i.e. VAT 6.3). AB Ltd. is required to deduct the applicable
amount of VAT at source and should deposit the same to the Government exchequer within
due time. However, in the absence of valid VAT invoice, AB Ltd. cannot take input VAT
credit. Therefore, I would advise AB Ltd. to discuss with PQ Ltd. to provide a valid VAT
invoice.

Answer (b)
In the given situation, AB Ltd. wants that ST Ltd. issue VAT 6.3 Challan in favor of ST Ltd.
As per the current provision of the VAT law, a person cannot issue VAT 6.3 Challan in favor
of himself. Therefore, it is assumed that the question intends to mean to issue VAT 6.3 Challan
in favor of AB Ltd instead of ST Ltd. so that it can get input VAT credit.
As per Section 51 of the VAT Act 2012 and Rule 40 of the VAT Rules 2016, every VAT
registered supplier has to issue Challan in form VAT 6.3 for supply of every good and such
VAT 6.3 challan has to be accompanied with the goods up to its final destination mentioned
on it as original to be given to the buyer. Moreover, the purchasers and seller's name, address,
registration number and destination of goods, etc. have to be clearly mentioned on the VAT
6.3 Challan. Moreover, as per Section 46 of the VAT Act 2012, the products purchased are
required to be brought into the premises of the registered entity in full to avail input VAT credit.
Therefore, for the given situation in the question, it is advisable to AB Ltd. to bring the
televisions into its own premises first from ST Ltd. for avoiding the risk of confiscation by the
VAT authority and availing input VAT credit. AB Ltd. can then supply the purchased

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televisions to the CD Ltd. Provided that the name, address, and VAT registration number, etc.
of AB Ltd. and ST Ltd. have to be clearly mentioned on the VAT 6.3 Challan.
However, this suggestion may be impracticable to follow if the business premise of CD Ltd.
and ST Ltd. is adjacent or nearer and that of AB Ltd. is far away from ST Ltd. In that case,
once getting the products from ST Ltd. and then sending them back to CD Ltd. may not be
cost-effective. AB Ltd., in that case, may open a small branch near to CD Ltd. with separate
VAT registration, receive the goods from ST Ltd. and immediately forward the same to CD
Ltd. The branch will perform the necessary documentation work to get input VAT credit,
deposit VAT and then sell the televisions to its dealer/customer.

12. VAT compliance

Three persons as follows are in the process of starting a new business and approach you for
advice under Value Added Tax Act 2012 considering the current provisions in force.
i) A Chartered Accountant is obtaining 'Certificate of Practice' from ICAB to begin
professional practice in accounting and auditing with an estimated annual fee income of Tk
7,500,000.
ii) A retired Biman Airlines Manager in the process of setting up a Tour Operator business.
Estimated annual commission income is Tk 6,500,000.
iii) XYZ Ltd., a private limited company, operating from Kaptan Bazar, Dhaka, and already a
VAT-registered assesse, engaged in product distribution got a new national distributorship
agreement from a Chinese Manufacturer to import, stock and sell the mobile handset in
Bangladesh. Estimated annual turnover of XYZ Ltd. from new handset dealership is Tk
25,000,000. The company plans to appoint District Distributors (DD) to sell mobile handsets
through selected retailers in major cities.

Requirement:
a) Please brief on the three persons shown in (i), (ii), (iii) above in connection with the
compliance under VAT law considering the provision now in force with respect to initial
compliance obligation and statutory VAT records. Examiner shall take into account mention
of Codes, prescribed VAT Forms, Records and Sections/Rules.
b) XYZ Ltd., the company in (iii) above requires additional advice on the formulation of the
handset price at various stages using the system of 'input VAT credit claims' at each stage of
delivery chain u/s 9 of the law. Please make the detailed computation of the price in each stage
up to MRP (Price to Distributor, Price to Retailer and MRP) clearly showing input-output VAT
adjustment and the net VAT payable amount in each stage of National Distributor (ND) and
District Distributor. Your answer should also contain a reconciliation of the 'VAT (15%) on
the cost to retail' and summation of VAT at earlier stages beginning from the import.
[Assume: Per unit landed cost of XYZ Ltd is Tk 5,500 including import stage VAT (15% =
660), AIT (5% = 220) and Advance TAX (5% = 220), and margin is 50% on landed cost. ND
margin 15% on cost price, Trade Promotion expense, estimated damage recovery total 15% on
'value after ND margin'; DD margin 5% and Retailer margin 15%]
c) XYZ Ltd., the company in (iii) above may soon run out of space at the present rented
premises upon addition of a new set of employees for handset dealership. The company has
owned bigger floor space in Uttara, Dhaka. Management is considering the option of moving

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from current rented space from Kaptan Bazar to own space in Uttara, two being separate VAT
divisions, Please advise Company on steps within the purview of VAT law (mentioning
Section, Rule and prescribed From) if the company decides to change office/store to Uttara.

Solution#12
Answer (a)
(i) Chartered Accountants Firm/ (ii) Tour Operator:
a) VAT Registration
Initial compliance obligation is VAT registration using Form VAT 2.1 and obtain VAT
registration certificate at VAT 2.3. Although it may appear that the firm will not be required to
obtain VAT registration certificate rather will be required to obtain turnover tax registration
since their estimated annual turnover is less than threshold i.e. Tk 3 crore as per General Order
No. 17/VAT/2019 of 2019 the firm must apply for VAT registration irrespective of annual
turnover.
b) Input-Output Coefficient
The firm is required to file Input-Output Coefficient Declaration in VAT Form 4.3. For the first
supply of goods and services, Input-Output Coefficient Declaration should be filed with the
VAT Authority’s online system or concerning divisional VAT official 15 days prior to the date
of supply.
c) VAT payment
The payer is responsible for deduction of VAT at source at the time of making payment to the
CA firm if a proper invoice is not raised. The firm will be required to collect VAT 6.6 from the
payer in case of deduction at source. VAT paid to the firm must be deposited to the Government
Exchequer along with submission of VAT return. VAT withheld from the service provider
should also be deposited to the government exchequer.
d) VAT return
VAT return (VAT 9.1) must be filed to the respective circle within 15th day of the next month.
e) VAT record keeping
VAT 6.3, VAT 6.6, Treasury Challan, etc.

(iii) XYZ Ltd:

a) VAT Registration
XYZ is already a VAT registered person. Their type may be a trader. However, we need to
review VAT registration certificate as to whether their types also includes importer or not. If
not then XYZ will be required to amend VAT registration to include importer in their VAT
registration.
b) Input-Output Coefficient
XYZ Ltd is required to file Input-Output Coefficient Declaration in VAT Form 4.3. For the
first supply of goods and services, Input-Output Coefficient Declaration should be filed with
the VAT Authority’s online system or concerning divisional VAT official 15 days prior to the
date of supply.
c) VAT payment
VAT is payable being trader @ 5% along with filing return. Decreasing adjustment for @ 5%
AT has already been deposited to the Government Exchequer at the time of importation of the

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mobile handset. If XYZ follows price declaration basis, they will be required to pay VAT on
the value addition at the time of selling goods to their customer @15% on value addition and
claim input VAT credit.
d) VAT return
VAT return (VAT 9.1) must be filed to the respective circle within 15th day of the next month.
e) VAT record keeping
VAT records (as existing) are VAT 6.2.1, VAT 6.3, VAT return 9.1, etc. Other related
documents to support information in the statutory records.

Answer (b):
Calculation of landed cost:
Total cost 5,500
VAT (660)
AIT (220)
AT (220)
Landed cost 4,400
Price computation at each stage:
Value addition
Input Net
Stage Input Output Output Invoice
Margin Expense VAT VAT
VAT price
VAT paid at
880
import stage
XYZ 4,400 2,200 - 6,600 880 990 7,590 110
ND 6,600 990 990 8,580 990 1,287 9,867 297
DD 8,580 429 - 9,009 1,287 1,351 10,360 64
Retailer 10,360 1,554 - 11,914 1,351 1,787 13,701 436
Customer 11,914 - - - - - - -
Total 1,787
The total cost to be paid by customer = 13,701

Answer (C)
Rules 13 of VAT Rules 2016 provides for formalities as to the change of business location and
situation. This is, however, not for ownership change. Application for change of business
location and nature should be done 15 days prior to the change. All pending VAT must be paid
off before the application or an undertaking on stamp paper to settle VAT or other liabilities
with VAT law. Any work stoppage at the present location must be informed to the respective
VAT circle. The physical change of the location and transfer of the stock-in-trade should not
be done without clearance from present VAT circle. Steps to be taken are as follows:
 Application for change of location in Form VAT 2.5 to present VAT Circle.
[Together with the attested copies of Trade License, Lease Agreement, NID, original VAT
registration certificate, application in plain paper, copies of previous four months' VAT return.]
 VAT inspector shall visit the location to inspect stock-in-trade/other information of the
XYZ Ltd.

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 Information of such change and a copy of the application for change should also be
filed with the new VAT circle under new VAT division (as the change to a separate
division, Uttara).
 After scrutiny and satisfaction, the present VAT circle shall cause to transfer VAT file
of the assesse to the new VAT Circle.

13. VAT impact in different stages

A manufacturer sold goods worth Tk 10 lakh to the wholesaler by including VAT @ 15%. The
wholesaler added 10% as mark up and sold the goods to the retailer by adding VAT who in
turn sold the goods to the consumer by adding markup @ 15%. Compute VAT at each stage
and indicate the total VAT paid by the consumer.

Solution#13
Manufacturer Wholesaler Retailer Consumer
Particulars
Tk Tk Tk Tk
a) Cost of goods 1,150,000 1,265,000
(b) Input VAT Recoverable 150,000 165,000
(c) Net cost of goods sold 1,000,000 1,100,000
(d) Mark-up 100,000 165,000
(e) Selling price Net of VAT 1,000,000 1,100,000 1,265,000
(f) VAT chargeable 150,000 165,000 189,750
(g) Gross selling price 1,150,000 1,265,000 1,454,750
Gross VAT due 150,000 165,000 189,750
VAT recoverable - 150,000 165,000
Net VAT payable 150,000 15,000 24,750
VAT borne by the Consumer = 189,750

Alternative:
Net VAT
Input Amount of Output Input Output
Stage of payable
Price Value Price VAT VAT
Business (Treasury
(Taka) Addition (Taka) (Taka) (Taka)
Deposit)

Manufacturer -
- 1,000,000 1,000,000 150,000 150,000

Wholesaler
1,000,000 100,000 1,100,000 150,000 165,000 15,000

Retailer
1,100,000 165,000 1,265,000 165,000 189,750 24,750
VAT borne by consumer 89,750

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