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How does the VAT system in Bangladesh work?

  1. VAT was initially solely applied to the manufacturing and import stages of the process.
  2. VAT had a standard rate of 15%, which was applied consistently to all taxable products and services at first.
  3. VAT coverage has increasingly expanded to a vast number of service sectors, as well as wholesale and retail levels, throughout the years.
  4. 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.
  5. The ‘truncated value-base’ was corrected with the associated provision of waiving ‘input tax credit,’ thereby cutting the input credit chain early.
  6. Tariff values were established in several cases as well, usually at substantially lower levels.
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