VALUE ADDED TAX

1)what is zero-rated and exempt goods and services? Difference between these with examples

ANSWER: Zero-rated and exempt goods and services refer to different tax treatments under a value-added tax
(VAT) system.

Zero-rated goods and services are those that are subject to VAT, but at a rate of 0%. This means that while VAT is
charged on the sale of the goods or services, the rate of tax applied is 0%. This also means that the seller can claim
back any VAT they have paid on their own purchases. Examples of zero-rated goods and services include basic
food items, medical equipment, exports, and education.

Exempt goods and services, on the other hand, are not subject to VAT at all. This means that neither the buyer nor
the seller pays any VAT on the transaction, and the seller cannot claim back any VAT they have paid on their own
purchases. Examples of exempt goods and services include health care services, financial services, and some
types of insurance.

The key difference between zero-rated and exempt goods and services is that while zero-rated goods and services
are still subject to VAT, the rate of tax applied is 0%, while exempt goods and services are not subject to VAT at all.
This difference can have significant implications for businesses, as the ability to claim back VAT can affect
profitability and cash flow.

2)When is zero tax imposed under the VAT ACT 1991?What are the procedures to be adopted for the
disposal of damaged or destroyed goods in accident under the above VAT ACT?

ANSWER: The Value Added Tax (VAT) Act 1991 in Bangladesh also provides for the imposition of zero tax
on certain goods and services. Examples of zero-rated goods and services in Bangladesh include exports,
agricultural inputs, and basic food items.
Regarding the disposal of damaged or destroyed goods in an accident, the procedures to be adopted
in Bangladesh are as follows:

 The person who owns the goods or has custody of them must inform the VAT authority within 15 days of
the damage or destruction.

 The person must submit a written application to the VAT authority with details of the damaged or
destroyed goods, including the quantity, description, value, and the cause of the damage or destruction.

 The VAT authority may require the person to provide additional information or evidence to support the
application.

 The VAT authority will assess the application and, if satisfied that the goods have been damaged or
destroyed, will issue a certificate of destruction.

 The person can then claim a refund of the VAT paid on the goods in their next VAT return, based on the
value of the goods at the time of destruction or damage.

It's important to note that the procedures for the disposal of damaged or destroyed goods under the VAT Act in
Bangladesh may vary depending on the specific circumstances of the case, and it's always advisable to seek
professional advice when dealing with such situations.
3)VAT replaced previous sales tax.What are the reason for such change?

ANSWER:
The implementation of VAT (Value Added Tax) in place of the previous sales tax has several reasons, including:

Broadening of the tax base: VAT allows for the collection of tax at each stage of production or distribution, which
means that the tax base is broader than that of a single-point sales tax. This ensures that more businesses are
brought into the tax net and results in a more efficient and effective tax system.

Reduction of tax evasion: The multi-stage nature of VAT makes it more difficult for businesses to evade tax, as the
tax authorities can track the movement of goods and the corresponding VAT paid or collected at each stage of
production or distribution.

Neutral taxation: VAT is considered to be a more neutral form of taxation as it does not discriminate against any
particular industry or product. This is because VAT is charged at the same rate on all goods and services, and
businesses can claim back the VAT they have paid on their own purchases.

Increased revenue: VAT generally results in increased tax revenue for the government due to its broader tax base
and reduced opportunities for tax evasion.

International best practice: VAT is a widely accepted and implemented tax system around the world, and its
implementation in a country can improve the country's international reputation and ease of doing business.

Overall, the switch to VAT from sales tax was a necessary step for many countries to modernize their tax system,
improve revenue collection, and make their tax system more efficient and effective.

4)Income tax is paid at progressive rates But VAT is paid at a flat rate.Do you think such a flat rate is
unfair?Explain by BD VAT rules
VAT (Value Added Tax) is a consumption tax that is added to the price of goods and services. In Bangladesh, the
standard VAT rate is 15%, but some items are subject to reduced or zero-rated VAT. The VAT system is designed to
be a flat rate, meaning that all consumers pay the same percentage of tax on the value of the goods or services
they purchase.

On the other hand, income tax is a tax that is levied on the income earned by individuals and businesses. In
Bangladesh, income tax rates are progressive, meaning that the more income an individual or business earns, the
higher percentage of their income they will pay in taxes.

 Whether a flat rate VAT is unfair or not depends on individual perspectives and beliefs. Some argue that
it is regressive since it imposes the same burden on low-income and high-income individuals. Others
argue that it is fair since it treats everyone equally, and the amount of tax paid is proportional to the
value of the goods or services purchased.Ultimately, the fairness of a tax system depends on many
factors, including its impact on income distribution, economic growth, and government revenue.
Governments may choose to implement different tax systems based on their economic and social
objectives.

5)What are the goods that are exempted from VAT As per the BD VAT first Schedule?

ANSWER: In Bangladesh, the first schedule of the VAT Act contains a list of goods and services that are
exempted from VAT. Here are some of the goods that are exempted from VAT as per the first
schedule of the BD VAT Act:
  Agricultural products, such as fresh fruits, vegetables, and grains
 Live animals, including livestock and poultry
 Certain types of fish and seafood
 Unprocessed food items, such as flour, rice, and sugar
 Medical supplies and medicines, including vaccines, insulin, and antibiotics
 Certain educational services, such as preschool and primary education
 Certain financial services, such as life insurance and bank deposits
 Postal services and certain types of telecommunications services
 Certain types of newspapers and books, including textbooks and scientific journals
 Certain types of religious and charitable activities.
It's important to note that while these goods and services are exempted from VAT, other taxes or
duties may still apply to them. Also, there are some conditions and limitations to these exemptions,
which may vary depending on the specific item or service.

6)What are the services that are exempted from VAT as per BD VAT first Schedule?

ANSWER:

In Bangladesh, the first schedule of the VAT Act contains a list of goods and services that are exempted
from VAT. Here are some of the services that are exempted from VAT as per the first schedule
of the BD VAT Act:

 Healthcare services provided by registered medical practitioners, hospitals, clinics, and

diagnostic centers.
 Educational services provided by preschool, primary, secondary, higher secondary, and
vocational institutions.
 Postal services provided by the Bangladesh Post Office and its subsidiaries.
 Transportation services provided by Bangladesh Railway, BRTC, and other transport operators,
including public transport.
 Financial services provided by banks, insurance companies, and other financial institutions,
including loans, deposits, and insurance policies.
 Religious and charitable services provided by non-profit organizations and institutions.
 International air and sea transportation services provided by airlines and shipping companies.
 Public utility services, including electricity, water supply, and gas supply.
 Agricultural services provided by farmers and agriculture cooperatives.
 Diplomatic missions and their personnel, for services provided in their official capacity.
It's important to note that while these services are exempted from VAT, other taxes or duties may
still apply to them. Also, there are some conditions and limitations to these exemptions, which may vary
depending on the specific service or situation.

7)Mention some services which are used by the rich and wealthy but currently are exempted from
VAT.

ANSWER: As per the first schedule of the VAT Act in Bangladesh, certain services are exempted from
VAT, regardless of the income level of the service recipients. Here are some services that may be
used by the rich and wealthy and are currently exempted from VAT in Bangladesh:
  Private education services provided by schools, colleges, and universities that are not owned or
operated by the government.
 Healthcare services provided by private hospitals and clinics, including medical tests and
consultations.
 Legal services provided by lawyers and law firms.
 Professional consultancy services provided by accounting firms, management consultants, and
other professional service providers.
 Luxury transportation services provided by limousine companies and other high-end transport
providers.
 Fine dining services provided by luxury restaurants and hotels.
 High-end recreational services provided by exclusive clubs, spas, and resorts.
 Investment management services provided by wealth management companies, private equity
firms, and hedge funds.
 Art and antique dealing services provided by auction houses, galleries, and dealers.
 High-end personal grooming services provided by spas and salons.
It's important to note that while these services may be used by the rich and wealthy, their exemption
from VAT is not based on the income level of the service recipients. Rather, it is based on the nature of
the service provided and the policy decisions of the government regarding VAT exemptions.

8)What is supplementary duty?Why and on what value is it charged? Mention some products and
services and rates of BD supplementary duty that are charged on these as per Second schedule.
ANSWER: Supplementary Duty (SD) is a type of tax that is imposed on certain goods and services in addition to
VAT in Bangladesh. It is a specific tax that is levied on specific products and services that are considered to be non-
essential or luxury items. SD is charged as a percentage of the retail price of the product or service.

The main objective of the SD is to raise revenue for the government and discourage the consumption of non-
essential or luxury items. It is also used as a tool to promote social welfare by reducing the consumption of harmful
products such as tobacco and alcohol.
Here are some of the products and services that are subject to SD in Bangladesh, along with their corresponding
SD rates, as per the Second Schedule of the VAT Act:
 Cigarettes: SD rate of 55% of the retail price.
 Soft drinks: SD rate of 20% of the retail price.
 Mobile phone services: SD rate of 5% of the value of the service.
 Luxury vehicles: SD rate of 45% of the retail price.
 Imported cosmetics: SD rate of 60% of the retail price.
 Alcoholic beverages: SD rate of 75% of the retail price.
 High-end watches and jewelry: SD rate of 30% of the retail price.
 Imported chocolates and candies: SD rate of 25% of the retail price.
 High-end perfumes and fragrances: SD rate of 25% of the retail price.
 Luxury yacht and boat rental services: SD rate of 30% of the value of the service.
It's important to note that the SD rates and products/services that are subject to SD may change over time as per
the government's policy decisions.

9)Are there provisions for VAT deduction at source?Give the name of BD agencies and authorities who
are requires to deduct VAT at source
ANSWER:
Yes, there are provisions for VAT deduction at source in Bangladesh . VAT deduction at source
means that certain agencies or authorities are required to deduct VAT from the payment they make to
suppliers or service providers, and remit it to the government on their behalf.
The following agencies and authorities are required to deduct VAT at source in Bangladesh:

Government agencies: All government agencies, including ministries, departments, and agencies, are
required to deduct VAT at source on their purchases of goods and services.

Local government bodies: All local government bodies, including city corporations, municipalities, and
union parishads, are required to deduct VAT at source on their purchases of goods and services.

Public universities: All public universities in Bangladesh are required to deduct VAT at source on their
purchases of goods and services.

Banks and financial institutions: Banks and financial institutions are required to deduct VAT at source
on certain types of transactions, including ATM and credit card services.

Private companies: Private companies that are registered for VAT and have an annual turnover of at
least BDT 50 million are required to deduct VAT at source on their purchases of goods and services.

It's important to note that the provisions for VAT deduction at source may vary depending on the
specific situation and the type of transaction involved. The relevant authorities may also issue guidelines
and regulations from time to time to ensure proper implementation of the VAT deduction at source
system.

10)Give the name of service providers from whom BD VAT is deducted at source
ANSWER:
In Bangladesh, VAT is deducted at source from payments made to certain types of service providers.
The following are the types of service providers from whom VAT is deducted at source:

Advertisement agencies: VAT is deducted at source from payments made to advertisement agencies for
their services.

Event management companies: VAT is deducted at source from payments made to event management
companies for their services.

Travel agencies: VAT is deducted at source from payments made to travel agencies for their services,
including ticketing and hotel booking.

Security service providers: VAT is deducted at source from payments made to security service providers
for their services.

Cleaning and janitorial service providers: VAT is deducted at source from payments made to cleaning
and janitorial service providers for their services.

Catering and food service providers: VAT is deducted at source from payments made to catering and
food service providers for their services.

IT and software development service providers: VAT is deducted at source from payments made to IT
and software development service providers for their services.
It's important to note that the provisions for VAT deduction at source may vary depending on the
specific situation and the type of service provided. The relevant authorities may also issue guidelines
and regulations from time to time to ensure proper implementation of the VAT deduction at source
system.
11)Distinguish Between VAT in BD and GST In India
ANSWER: VAT in Bangladesh and GST in India are both consumption taxes that are applied to goods and services. However,
there are several key differences between the two tax systems:

Tax Rates: VAT in Bangladesh is charged at different rates, ranging from zero percent to 15 percent, depending on the type of
goods or services. In contrast, GST in India is charged at four different rates: 5%, 12%, 18% and 28%.

Tax Structure: VAT in Bangladesh is a state-level tax and is administered by the National Board of Revenue (NBR), whereas
GST in India is a national-level tax and is administered by the Goods and Services Tax Council.

Tax Thresholds: In Bangladesh, businesses with an annual turnover of less than BDT 3 million are exempted from VAT
registration. In India, businesses with an annual turnover of less than INR 20 lakh are exempted from GST registration.

Input Tax Credit: Both VAT in Bangladesh and GST in India allow businesses to claim input tax credit on the tax paid on their
purchases. However, the input tax credit mechanism in GST is more robust and comprehensive compared to the VAT system in
Bangladesh.

Compliance Requirements: The compliance requirements for VAT in Bangladesh and GST in India are also different. In
Bangladesh, businesses are required to file monthly VAT returns, whereas in India, businesses are required to file monthly or
quarterly GST returns, depending on their turnover.

Overall, while VAT in Bangladesh and GST in India share some similarities, there are also significant differences in terms of
tax rates, tax structure, tax thresholds, input tax credit, and compliance requirements.
12)What is the problem of related party transactions in VAT system?How can this problem be
controlled?
ANSWER: Related party transactions in VAT system refer to transactions between two parties that have
a pre-existing relationship, such as a parent company and its subsidiary, or two companies that share
common ownership. Such transactions can create problems in the VAT system, as there is a risk that the
parties involved may manipulate prices or transactions to reduce their VAT liability.

One of the key problems with related party transactions is that the parties involved may not necessarily
transact at arm's length, meaning that the prices or terms of the transaction may not reflect market
prices. This can result in a distortion of the VAT base, as the actual value of the transaction may be
different from the value used for calculating VAT.

To control the problem of related party transactions in the VAT system, several measures can be
taken, including:

Arm's length principle: Tax authorities can use the arm's length principle to ensure that related party
transactions are conducted at market prices. This involves comparing the prices of similar transactions in
the open market to determine whether the related party transaction is being conducted at fair market
value.

Documentation requirements: Tax authorities can require businesses to maintain documentation

related to their related party transactions, such as contracts, invoices, and pricing information. This can
help ensure that the transactions are conducted at arm's length and can be verified by tax authorities.
Transfer pricing rules: Transfer pricing rules can be used to prevent companies from manipulating prices
or transactions to reduce their VAT liability. These rules specify how related party transactions should be
priced, and require businesses to provide documentation to support their pricing decisions.

Risk-based approach: Tax authorities can use a risk-based approach to identify high-risk related party
transactions and focus their audit resources on these transactions.

Overall, the problem of related party transactions in the VAT system can be controlled through a
combination of measures, including the arm's length principle, documentation requirements, transfer
pricing rules, and a risk-based approach. By implementing these measures, tax authorities can help
ensure that VAT is collected on the correct value of transactions, and prevent businesses from
manipulating prices to reduce their VAT liability.
13)Give the variations of VAT under the VAT ACT 1991.Why are there provisions of such variations?
ANSWER: The BD VAT ACT 1991 provides for several variations of VAT, which include:

Standard VAT Rate: This is the default rate of VAT, which is currently set at 15% in Bangladesh.

Zero-rated VAT: Certain goods and services are exempted from VAT but still qualify for input tax credit.
These include goods and services that are exported, or are supplied to businesses that are engaged in
exports.

Reduced VAT Rates: Some goods and services are subject to a reduced rate of VAT, which is currently
set at 5%. These include certain food items, medicines, and medical equipment.

Exempted VAT: Certain goods and services are exempted from VAT, which means that no VAT is charged
on these items and input tax credit is not available for the VAT paid on purchases of these items. These
include basic necessities like rice, salt, and fish.

The provisions for these variations of VAT are included in the BD VAT ACT 1991 to promote economic
growth and development, as well as to provide relief to certain sectors of the economy. For example,
the zero-rated VAT provision is intended to encourage exports and promote international trade, while
the reduced VAT rate provision is intended to provide relief to low-income consumers by making certain
essential goods more affordable.

Similarly, the exempted VAT provision is intended to provide relief to consumers of basic necessities and
to avoid the regressive impact of VAT on the poorest members of society. The BD VAT ACT 1991
recognizes the importance of providing flexibility in the VAT system to ensure that it remains effective
and responsive to the changing needs of the economy and society.

14)What is truncated VAT And what is its purpose?

ANSWER: Truncated VAT is a simplified version of the Value Added Tax (VAT) system. It is designed to reduce the
compliance burden on small businesses by exempting them from many of the administrative and reporting requirements of the
full VAT system.
Under truncated VAT, businesses are not required to maintain detailed records of their sales and purchases, or to submit
regular VAT returns to the tax authorities. Instead, they are required to pay a fixed percentage of their gross sales as VAT. This
percentage is typically lower than the standard VAT rate, and is designed to provide a simplified method of calculating VAT
liability for small businesses.
The purpose of truncated VAT is to reduce the compliance burden on small businesses and to encourage them to
participate in the formal economy. Small businesses often face significant challenges in complying with the administrative and
reporting requirements of the full VAT system, which can be time-consuming and expensive. By simplifying the VAT system for
small businesses, truncated VAT can help to reduce the cost of compliance and encourage more small businesses to register for
VAT.
Truncated VAT can also help to reduce tax evasion by providing a simpler and more transparent system of VAT
collection. By simplifying the VAT system, truncated VAT can help to reduce the incentives for businesses to engage in tax
evasion, as the costs and risks associated with evasion are increased. Overall, truncated VAT is intended to promote greater tax
compliance and to support the growth and development of small businesses.

15)How is truncated VAT different from mainstream VAT?

ANSWER: Truncated VAT is a simplified version of the mainstream Value Added Tax (VAT) system.
The key differences between the two are as follows:

Calculation of VAT liability: Under the mainstream VAT system, businesses are required to maintain
detailed records of their sales and purchases and calculate their VAT liability based on the difference
between their output VAT (VAT charged on sales) and input VAT (VAT paid on purchases). In contrast,
under truncated VAT, businesses are required to pay a fixed percentage of their gross sales as VAT. The
percentage is typically lower than the standard VAT rate.

Reporting requirements: Under the mainstream VAT system, businesses are required to submit regular
VAT returns to the tax authorities, which include details of their sales and purchases and their VAT
liability. In contrast, under truncated VAT, businesses are not required to maintain detailed records or
submit regular VAT returns. They are only required to pay the fixed percentage of their gross sales as
VAT.

Eligibility criteria: In most countries, truncated VAT is only available to small businesses that meet
certain eligibility criteria. In contrast, the mainstream VAT system applies to all businesses that meet a
certain turnover threshold.

Input tax credit: Under the mainstream VAT system, businesses are entitled to claim input tax credit for
the VAT paid on their purchases. This helps to avoid double taxation and ensures that VAT is only
charged on the value added at each stage of the supply chain. In contrast, under truncated VAT,
businesses are not entitled to claim input tax credit.

16)What is VAT Buoyancy or Elasticity ? Compare VAT buoyancy of BD with that of other countries
ANSWER:
VAT buoyancy or elasticity refers to the responsiveness of VAT revenue to changes in economic activity or GDP (Gross
Domestic Product). Specifically, it measures how much additional VAT revenue is generated for every one percent increase in
GDP. A high VAT buoyancy means that VAT revenue will increase at a faster rate than the increase in GDP, while a low buoyancy
means that VAT revenue will increase at a slower rate than the increase in GDP.

In the case of Bangladesh, the VAT buoyancy has been relatively low compared to other countries. According to a World Bank
report, the VAT buoyancy in Bangladesh was 0.81 in 2018, which is lower than the average buoyancy of 1.22 for low-income
countries and 1.47 for middle-income countries. This means that for every 1% increase in GDP, VAT revenue in Bangladesh only
increases by 0.81%.

In comparison, other countries have higher VAT buoyancies. For example, the buoyancy for India was 1.3 in 2018, 1.71 for
Indonesia, and 1.96 for Vietnam. The high buoyancy in these countries suggests that their VAT systems are more effective at
capturing economic activity and generating revenue.
The reasons for the low VAT buoyancy in Bangladesh are complex and multifaceted, and may include weaknesses in tax
administration, a large informal sector, and widespread tax evasion. Improving VAT buoyancy in Bangladesh will require
reforms in tax administration, including better enforcement of tax laws and regulations, as well as policies to encourage
formalization of the informal sector.

17)It is a general perception that even the lowest earning people pay VAT.Do you agree?Explain
ANSWER:
It is generally true that even the lowest earning people pay VAT (Value Added Tax), although the extent to which they pay VAT
can vary depending on the specific VAT policies and exemptions in a given country.

VAT is a consumption tax that is applied to most goods and services at every stage of production and distribution. When a
product or service is sold, the VAT is included in the price, and the buyer pays the VAT as part of the total price. This means that
even people with low incomes who purchase basic goods and services, such as food and clothing, are likely to be paying VAT on
these items.

In many countries, VAT policies are designed to provide exemptions or reduced rates for certain goods and services that are
considered essential, such as basic food items, healthcare services, and education. These exemptions and reduced rates are
intended to provide relief for low-income households, but they are not always sufficient to fully eliminate the burden of VAT on
these households.

Furthermore, because VAT is ultimately passed on to consumers as part of the price of goods and services, the burden of VAT
can be regressive, meaning that it takes a larger share of income from lower-income households than from higher-income
households. This is because lower-income households spend a larger share of their income on basic goods and services that are
subject to VAT, while higher-income households can afford to spend more on non-essential items that may be exempt from
VAT or subject to a lower rate.
18)GIVE SOME BD COURT CASES ON VAT
ANSWER: Rangs Electronics Ltd. v. Commissioner, Customs, Excise and VAT: In this case, the Appellate Division of
the Supreme Court of Bangladesh ruled that the provision of "deemed supply" in the VAT law was unconstitutional. The court
held that the provision, which imposed VAT on certain transactions even if no consideration was received, violated the
principles of natural justice and due process.

Bangladesh Commerce Bank Ltd. v. Commissioner of Customs, Excise and VAT: In this case, the High Court
Division of the Supreme Court of Bangladesh ruled that the imposition of VAT on bank charges for services provided to
customers was unconstitutional. The court held that the VAT law did not provide a clear definition of the term "services," and
that the imposition of VAT on bank charges amounted to double taxation.

Grameenphone Ltd. v. Commissioner of Customs, Excise and VAT: In this case, the High Court Division of the
Supreme Court of Bangladesh ruled that the imposition of VAT on international incoming calls was unconstitutional. The court
held that the VAT law did not provide a clear definition of the term "services," and that the imposition of VAT on international
incoming calls amounted to double taxation.

19)How can the tax authority recover tax due from the tax defaulter?
ANSWER: Seizure of assets: Tax authorities can seize assets belonging to the tax defaulter, such as real estate, vehicles,
bank accounts, or inventory. The assets can be sold to recover the tax due.

Garnishment of wages: Tax authorities can garnish a portion of the tax defaulter's wages or salary to recover the tax due.

Tax liens: Tax authorities can place a lien on the tax defaulter's property or assets, which gives the tax authority a legal
claim to the property or assets until the tax debt is paid.

Penalties and interest: Tax authorities can impose penalties and interest on the tax defaulter, which can add to the
amount owed and increase the pressure to pay.

Legal action: Tax authorities can initiate legal action against the tax defaulter, such as filing a lawsuit or obtaining a court
order, to enforce the collection of the tax due.
 Customs Duties
1)Are there exemptions on any BD goods and services imported?Why are there exemptions?
Explain with example
ANSWER:
Yes, there are exemptions on certain goods and services that are imported into Bangladesh . The
exemptions are usually granted for specific reasons such as to support the development of certain sectors, to
promote trade and investment, or to provide relief to certain groups of people.

One example of an exemption is the duty-free import of machinery and equipment for the agriculture sector in
Bangladesh. The government of Bangladesh provides this exemption to encourage the development of agriculture
and to promote food security in the country. Another example is the duty exemption provided for the import of
raw materials and machinery for the textile industry. This is done to support the growth of the textile sector, which
is one of the main contributors to the economy of Bangladesh.

The exemptions on imported goods and services in Bangladesh are usually granted through various policies, laws,
and regulations. For instance, the Bangladesh Tariff Commission and the National Board of Revenue are
responsible for determining the duty rates and exemptions on imported goods. The government also periodically
reviews and updates the list of exempted goods and services based on the changing economic and social
conditions of the country.

In conclusion, exemptions on imported goods and services in Bangladesh are provided for specific reasons, such as
to promote trade, investment, and development in certain sectors. These exemptions play a crucial role in the
economic development of the country and help to ensure the welfare of its people.
2)What is bonded warehouse? What is its utility? What are its misuses?
ANSWER:
A bonded warehouse is a facility where goods can be stored temporarily, without the payment of customs duties and
taxes, until they are either exported or cleared for import into the country. Bonded warehouses are typically operated by
private companies and are regulated by the government.

The utility of bonded warehouses is that they provide several benefits to both the importers and exporters. Importers can store
their goods in a bonded warehouse until they are ready to be distributed in the domestic market, allowing them to defer the
payment of customs duties and taxes until the goods are sold. Exporters can also store their goods in bonded warehouses until
they are ready to be shipped to other countries, allowing them to consolidate their shipments and take advantage of
economies of scale.

However, bonded warehouses can also be misused for illegal activities, such as smuggling and tax evasion. For example,
unscrupulous traders may use bonded warehouses to store goods without declaring them to the authorities, in order to evade
taxes or customs duties. They may also falsify documents to conceal the true nature of the goods, or bribe customs officials to
overlook their activities.

To prevent the misuse of bonded warehouses, governments typically impose strict regulations and monitoring procedures. For
example, they may require bonded warehouse operators to maintain detailed records of all goods stored in the warehouse and
to report any suspicious activities to the authorities. They may also conduct regular inspections and audits to ensure that the
goods stored in the warehouse are legal and properly declared.

In summary, bonded warehouses are useful facilities that provide benefits to importers and exporters, but they
can also be misused for illegal activities. Governments and regulatory bodies must monitor and enforce strict
regulations to prevent these abuses and ensure that the facilities are used for legitimate purposes.
3)How is the first schedule of customs act 1969 organized?
ANSWER:The First Schedule of the Customs Act 1969 is organized into two parts:
Part I: The First Schedule lists goods that are subject to specific rates of duty. The goods are organized into various sections,
such as Section I for live animals, Section II for meat and edible meat offal, and so on. Each section contains a list of specific
goods, their tariff classification, and the applicable duty rate.

Part II: The Second Schedule lists goods that are subject to ad valorem rates of duty. These are goods for which the duty rate
is calculated as a percentage of the value of the goods. The goods are again organized into various sections, with each section
containing a list of specific goods, their tariff classification, and the applicable ad valorem rate of duty.

The First Schedule of the Customs Act 1969 is an important reference document for customs officials, importers, exporters,
and other stakeholders involved in international trade. It provides a clear and comprehensive list of goods and their associated
duty rates, allowing for the proper classification and valuation of goods for customs purposes. The Schedule is regularly
updated to reflect changes in tariff rates and to incorporate new goods and products that may be subject to customs duties.
4)Explain and brief the various regulations and regulatory authorities that are responsible for
imports and exports in BD?
ANSWER: Bangladesh has a complex regulatory framework for imports and exports, which involves several regulations and
regulatory authorities. The key regulations and regulatory authorities responsible for imports and exports in Bangladesh are:

Bangladesh Customs Regulations: These regulations are the primary laws governing the import and export of goods in
Bangladesh. They specify the procedures and requirements for clearing goods through customs, as well as the duties and taxes
applicable to different types of goods.

Import Policy Order: The Import Policy Order is an annual document issued by the Ministry of Commerce that sets out the
guidelines for importing different types of goods into Bangladesh. It lists the products that can be imported, the requirements
for importing them, and the applicable duties and taxes.

Export Policy Order: The Export Policy Order is also an annual document issued by the Ministry of Commerce that outlines the
guidelines for exporting different types of goods from Bangladesh. It specifies the requirements for exporting various products,
the documentation needed, and the applicable duties and taxes.

National Board of Revenue (NBR): The NBR is the primary regulatory authority responsible for enforcing customs regulations in
Bangladesh. It is responsible for collecting customs duties, preventing smuggling, and ensuring compliance with customs
regulations.

Bangladesh Bank: The Bangladesh Bank is responsible for regulating foreign exchange transactions related to imports and
exports. It sets the exchange rate for different currencies and issues guidelines for payments and receipts related to
international trade.

Bangladesh Standards and Testing Institution (BSTI): The BSTI is responsible for ensuring that imported and exported goods
comply with the relevant standards and quality requirements. It issues licenses for importers and exporters of certain types of
goods and conducts inspections to ensure compliance with the relevant standards.

Department of Fisheries: The Department of Fisheries is responsible for regulating the import and export of fish and fish
products. It issues licenses for importing and exporting fish and fish products and monitors compliance with relevant standards
and regulations.

In summary, there are several regulations and regulatory authorities that are responsible for imports and exports in
Bangladesh. These regulations and regulatory authorities work together to ensure the smooth and efficient movement of goods
in and out of the country while ensuring compliance with relevant laws and regulations.
5)How can money laundering Act 2012 control over and under invoicing of import and
export?
ANSWER: The Bangladesh Money Laundering Prevention Act 2012 includes provisions to control over and under invoicing
of imports and exports in order to prevent money laundering and other financial crimes.

Under Section 2 of the Act, "money laundering" is defined as engaging in any transaction that involves proceeds of a crime or
illegal activity, with the intention of concealing or disguising the illicit origin of the funds.
To prevent money laundering through over or under invoicing, the Act requires that all import and export transactions be
accurately documented and reported. Specifically, Section 6(1) of the Act requires that all financial institutions and designated
non-financial businesses and professions (DNFBPs) maintain records of all transactions and related documents for at least five
years.

Section 6(2) requires that these records include "the nature and date of the transaction, the type and amount of currency
involved, the parties to the transaction, and any other information that the Bangladesh Bank may prescribe."

Furthermore, Section 7 of the Act requires that any person who conducts a transaction involving BDT 500,000 or more
(approximately USD 6,000) must provide identification and other relevant information to the financial institution or DNFBP
facilitating the transaction.

This information must be verified and recorded by the institution or DNFBP, and reported to the authorities in accordance with
the Act.

Overall, the Bangladesh Money Laundering Prevention Act 2012 provides a legal framework for combating money laundering,
including the use of over and under invoicing of imports and exports. By requiring accurate documentation and reporting of all
financial transactions, the Act helps to prevent illicit funds from entering or leaving the country through these channels.
6)Why are BD import tariffs lower in developed countries and higher in developing
countries?
ANSWER: There are several reasons why import tariffs in Bangladesh may be lower in developed countries and higher in
developing countries:

 Developed countries have more negotiating power in trade agreements. They can leverage their economic strength to
negotiate lower tariffs for their exports and lower tariffs for their imports. In contrast, developing countries may have
less negotiating power and may be pressured to maintain higher tariffs on imports to protect domestic industries.

 Developing countries often have less diversified economies and are more reliant on certain industries. Higher tariffs
on imports can help protect these domestic industries from foreign competition, which can be seen as a necessary
measure to protect domestic employment and promote economic development.

 Developed countries may have already established strong domestic industries and are less reliant on imports.
Therefore, lower import tariffs may not pose as much of a threat to their domestic industries as they would for
developing countries.

 Developed countries may have already invested in infrastructure and technology to improve productivity and
competitiveness, whereas developing countries may still be in the process of building up their economies. Higher
import tariffs may help provide the revenue needed to invest in such infrastructure and technology.

 Developing countries may have weaker institutions and may be more vulnerable to corruption and rent-seeking
behavior. Higher import tariffs can provide opportunities for rent-seeking behavior and corruption, which can further
hinder economic development.

It is worth noting that these reasons are not exhaustive and that there may be other factors at play that influence the
differences in import tariffs between developed and developing countries.
7)Explain each transfer price method briefly?
ANSWER: Transfer pricing refers to the process of determining the price at which goods, services, or intangible
property are transferred between related entities, such as different divisions or subsidiaries of the same
multinational corporation. There are several transfer pricing methods that can be used to determine the
appropriate price for these transactions. Here is a brief explanation of each transfer pricing method:

Comparable Uncontrolled Price (CUP) Method: This method compares the price of the related party transaction with the price
of a similar transaction between unrelated parties in similar circumstances. The price of the related party transaction is
considered arm's length if it is within a certain range of the price of the comparable transaction.
Cost Plus Method: This method determines the transfer price by adding a reasonable markup to the cost of production of the
goods or services transferred. The markup is based on industry standards or other factors that would be considered in a
transaction between unrelated parties.

Resale Price Method: This method determines the transfer price based on the resale price of the goods or services transferred
by the related party to an unrelated customer, minus an appropriate markup for the functions performed by the related party.

Transactional Net Margin Method (TNMM): This method compares the net profit margin of the related party transaction to
the net profit margin earned by comparable transactions between unrelated parties. The net profit margin is calculated as a
percentage of either the cost of goods sold, operating expenses, or sales revenue.

Profit Split Method: This method allocates the combined profits of the related parties based on the functions performed, assets
used, and risks assumed by each party. The profits are allocated based on a percentage or other formula that reflects the
contributions of each party to the transaction.

It is important to note that the appropriate transfer pricing method to use depends on the specific circumstances of the related
party transaction and that the method used should be consistent with the arm's length principle, which requires that the
transfer price be the same as if the transaction were between unrelated parties.
8)When does an importer overprice his import?prove with a numerical example
ANSWER: An importer may overprice their imports for various reasons, including to shift profits to a related
company in a low-tax jurisdiction, to reduce the amount of customs duties paid, or to evade taxes in the importing
country. Here is an example to illustrate how an importer could overprice their imports:

Let's say that an importer in Bangladesh wants to import a machine from a related company in China. The cost
of producing the machine is $10,000, but the importer and the related company agree to a transfer price of
$15,000, which is $5,000 higher than the actual cost of production.

Assuming the importer wants to shift profits to a related company in a low-tax jurisdiction, let's say the related
company is located in a tax haven where the corporate tax rate is only 5%. In Bangladesh, the corporate tax rate
is 25%.

If the importer declares the transfer price of $15,000 to Bangladeshi customs authorities, the customs duty would
be calculated based on this inflated value. For example, if the customs duty rate is 10%, the importer would pay a
customs duty of $1,500 (10% x $15,000).

However, the importer could claim a tax deduction for the inflated cost of the machine when calculating their
taxable income in Bangladesh. If the importer sells the machine for $20,000, they would report a profit of $5,000
($20,000 - $15,000). However, they would also claim a cost of goods sold of $15,000, reducing their taxable income
by the inflated transfer price.

As a result, the importer would pay corporate tax on a profit of only $1,000 ($5,000 profit - $4,000 tax deduction)
in Bangladesh, resulting in a tax saving of $1,000 (25% x $4,000). Meanwhile, the related company in the tax haven
would receive an additional $5,000 in profit that is subject to only a 5% tax rate, resulting in a tax saving of $200
(5% x $5,000).

This example shows how an importer could overprice their imports to shift profits to a related company in a low-
tax jurisdiction and reduce the amount of customs duties and taxes paid in the importing country.

9) who are related parties according to WCO?

ANSWER: The World Customs Organization (WCO) defines related parties as "persons who are so closely related that they
have a mutual interest in the transaction being valued." The WCO provides a list of persons who may be considered related
parties, which includes:

 An individual and their spouse, parents, children, and siblings.

  A company and its shareholders or members.
 Companies that are members of the same group of companies.
 A company and any person who directly or indirectly owns, controls, or holds 5% or more of the voting power or
share capital in the company.
 A company and its directors or officers.
 A company and any other company that is directly or indirectly controlled by the same person or persons.

The definition of related parties may vary depending on the specific customs legislation or regulations in a particular country.
However, the WCO's definition provides a useful guideline for identifying related parties in the context of customs valuation.
It is important to identify related parties accurately in order to ensure that the transfer pricing of goods or services between
them is consistent with the arm's length principle and to prevent the evasion of customs duties and taxes.
10)What are the functions of the Office of the Importer and Exporter?
ANSWER: In Bangladesh, the government agency responsible for regulating and facilitating
imports and exports is the Bangladesh Tariff Commission (BTC). The BTC is under the Ministry of
Commerce and has several functions related to imports and exports. These include:

Tariff determination: The BTC determines import and export tariffs and reviews and
recommends changes to tariff rates.

Trade policy analysis: The BTC conducts research and analysis on trade policies and trade-
related issues to inform policy-making.

Trade negotiations: The BTC participates in trade negotiations with other countries and
international organizations to advance Bangladesh's trade interests.

Trade facilitation: The BTC provides information and guidance to importers and exporters on
trade procedures, documentation, and compliance requirements. It also works to streamline
and simplify trade processes and reduce barriers to trade.

Trade data management: The BTC collects and maintains data on imports and exports to
monitor trade flows and identify trends and patterns.

Trade dispute resolution: The BTC provides mediation and dispute resolution services for trade-
related disputes between businesses and government agencies.

Overall, the Bangladesh Tariff Commission plays a key role in promoting and regulating
international trade in Bangladesh by setting tariffs, providing trade policy analysis and guidance,
facilitating trade, managing trade data, and resolving trade disputes.

11)Does trade war help or restrict competition and innovation? Explain

ANSWER: Trade wars typically restrict competition and innovation and can have negative consequences for
businesses, consumers, and the global economy as a whole. Trade wars are characterized by the imposition of
trade barriers such as tariffs, quotas, and other restrictions on imports and exports. These trade barriers can have
several effects on competition and innovation:
Reduced competition: Trade barriers can make it more difficult for businesses to compete in foreign markets.
They can increase the cost of imported goods and make it harder for businesses to access foreign markets. This can
reduce competition, limit consumer choice, and lead to higher prices for consumers.

Reduced innovation: Trade barriers can also limit innovation by making it harder for businesses to access new
ideas, technologies, and products from other countries. They can limit the flow of information and collaboration
between businesses and researchers in different countries, which can stifle innovation and slow the pace of
technological progress.

Negative impact on supply chains: Trade wars can disrupt global supply chains, making it harder for
businesses to source raw materials and components from other countries. This can lead to higher costs, delays,
and reduced efficiency.

Negative impact on the global economy: Trade wars can have a negative impact on the global economy
by reducing trade flows and investment, increasing uncertainty, and reducing economic growth.

In contrast, open and free trade can stimulate competition and innovation by increasing access to markets,
reducing costs, and fostering collaboration between businesses and researchers in different countries. By
promoting competition and innovation, free trade can drive economic growth and increase consumer welfare.
12)Suppose you are a customs officer and you have heard a lot about money laundering from
BD .How would you measure money laundering?Use WITS method(WORLD INTREGATED
TRADE SOLUTION)
ANSWER: WITS method is primarily used for analyzing trade flows and not specifically designed to
measure money laundering. Nonetheless, it can be used to identify patterns of trade that may be
indicative of money laundering activities.

The WITS method involves analyzing trade data to identify abnormal patterns of trade flows that may be
indicative of money laundering activities. The method involves the following steps:

Identify high-risk sectors: Certain sectors, such as jewelry, precious metals, and art, are at higher risk of
being used for money laundering activities. By identifying these sectors, customs officers can focus their
monitoring efforts on high-risk areas.

Identify high-risk countries: Certain countries may be at higher risk of being used for money laundering
activities due to weak governance, corruption, or other factors. By identifying these countries, customs
officers can focus their monitoring efforts on high-risk trade flows.

Analyze trade data: Customs officers can use trade data to identify abnormal patterns of trade flows
that may be indicative of money laundering activities. For example, they may look for instances where
the value of goods being imported or exported does not match their market value or instances where
goods are being imported and re-exported without any value-added.

Conduct further investigation: Once abnormal trade flows have been identified, customs officers can
conduct further investigation to determine if money laundering activities are taking place. This may
involve requesting additional documentation, conducting interviews with traders, or working with other
government agencies to gather more information.
Overall, while the WITS method may not provide a definitive measure of money laundering, it can be a
useful tool for customs officers to identify abnormal patterns of trade flows that may be indicative of
money laundering activities and to target their monitoring efforts accordingly.

13)Most of the ports around the world disclose only quantity of imports and exports but not
value in their annual reports .Do you think disclosure of value along with quantity is
necessary?
ANSWER: Yes, disclosure of both quantity and value of imports and exports is necessary for transparency and
accountability in international trade. While the disclosure of quantity information provides important information
on the volume of trade flows, it is incomplete without information on the value of goods being traded.

The disclosure of value information is essential for several reasons . First, it provides greater transparency and
accountability in international trade. The disclosure of value information makes it easier for governments, traders,
and other stakeholders to monitor trade flows and ensure that they comply with trade agreements, regulations,
and laws.

Second, the disclosure of value information can help to prevent illicit trade activities such as smuggling, money
laundering, and tax evasion. When the value of goods is not disclosed, it becomes easier for traders to undervalue
or overvalue goods, which can be used to avoid paying taxes or to launder money.

Third, the disclosure of value information can help to promote fair competition in international trade. When the
value of goods is not disclosed, it becomes easier for traders to engage in unfair trade practices such as dumping,
which can harm domestic producers and distort markets.

Overall, the disclosure of both quantity and value information is necessary for transparency, accountability, and
fair competition in international trade. While some ports may not disclose value information in their annual
reports, efforts should be made to encourage greater transparency and disclosure of information in order to
promote a more open and fair global trading system.
14) Give 3 different types of cases with the customs,excise and VAT tribunal involving
customs
ANSWER: Here are three different types of cases that may come before the Customs, Excise and VAT Tribunal
involving customs:

Customs Valuation Disputes: One common type of case that may come before the Customs, Excise and VAT
Tribunal involves disputes over the valuation of imported goods for customs purposes. Importers may challenge
the value assigned to their goods by customs officials, arguing that the value should be lower due to discounts,
rebates, or other factors. The tribunal may hear evidence from both parties and make a determination on the
appropriate value for the goods in question.

Classification Disputes: Another common type of case that may come before the tribunal involves disputes
over the classification of imported goods for customs purposes. Importers may challenge the classification
assigned to their goods by customs officials, arguing that they should be classified in a different category with
lower duty rates. The tribunal may review the relevant tariff classification codes and consider evidence presented
by both parties in order to make a determination on the appropriate classification.
Seizure and Forfeiture Cases: In some cases, customs officials may seize imported goods that they suspect
are counterfeit, infringe intellectual property rights, or are otherwise illegal. The importer may challenge the
seizure and seek to have the goods released, while customs officials may seek to have the goods forfeited. The
tribunal may hear evidence from both parties and make a determination on whether the seizure was justified and
whether the goods should be released or forfeited.

15)Mention some products where tariff is 0% and 1%

ANSWER:
In Bangladesh, the specific products and their corresponding tariff rates may change over time,
but here are some examples of products that may have a tariff rate of 0% or 1%:

0% tariff products:

Essential food items, such as rice, wheat, and pulses

Medical equipment and devices, such as surgical instruments and diagnostic apparatus
Books, newspapers, and journals
Some types of agricultural inputs, such as seeds and fertilizers
Renewable energy equipment, such as solar panels and wind turbines

1% tariff products:

Raw materials and intermediate goods used in manufacturing, such as steel and chemicals
Machinery and equipment used in manufacturing or agriculture
Some types of textiles and clothing
Some types of vehicles, such as electric cars or public transport vehicles
Some types of consumer goods, such as certain types of electronics or household appliances.