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How does the VAT system in Bangladesh work?
- VAT was initially solely applied to the manufacturing and import stages of the process.
- VAT had a standard rate of 15%, which was applied consistently to all taxable products and services at first.
- VAT coverage has increasingly expanded to a vast number of service sectors, as well as wholesale and retail levels, throughout the years.
- Despite a de jure single rate of 15%, the growth of the VAT resulted in political compromises such as the adoption of truncated value-bases, which resulted in a plurality of de facto tax rates.
- The ‘truncated value-base’ was corrected with the associated provision of waiving ‘input tax credit,’ thereby cutting the input credit chain early.
- Tariff values were established in several cases as well, usually at substantially lower levels.