The National Board of Revenue (NBR) has returned down the Dhaka Club Limited's application seeking exemption from arrear value-added tax (VAT) and supplementary duty of Tk34 crore.
A letter recently signed by Kazi Rezaul Hasan, second secretary (VAT Law and Rules) of the NBR, stated that it was not possible to give Dhaka Club exemption from duty. The organisation must clear the payable VAT as per Vat Act of 1991.
Kazi Rezaul said that the NBR had found preliminary evidence of payment of low VAT by Dhaka Club. According to the law, after ascertaining facts, a letter was served on the organisation asking it to pay the VAT. There could be no chance of exemption from this VAT, he added.
According to sources in the revenue board, Dhaka Club had collected VAT from customers by calculating the sale of each service but did not deposit it properly to the government exchequer.
On the basis of intelligence reports, the NBR confirmed that the organisation had paid Tk34 crore less in VAT and supplementary duty than it owed in seven years.
It is known that the main income of the club comes from its bar. Different brands of wine are sold there. Besides, Dhaka Club has earnings from various sectors, such as booking charge, service charge, rent, sale of bakery products, beauty parlour, guest house rent, health service, card room and laundry service.
According to the NBR report, from October 2009 to September 2014, the tax authority identified VAT and supplementary duty evasion of Tk26.70 crore. VAT and supplementary duty evasion of Tk7.4 crore was also found in 2015 and 2016. Thus, from 2009 to 2016, the organisation's duty evasion amounted to Tk33.74 crore.
An additional 2% interest would have to be paid on this money every month. This extra interest would be added to the regular dues, the report added.
The investigation revealed that Dhaka Club had evaded VAT by concealing information about the sale of various services, deduction of payable VAT, rent of premises, and sale of restaurants and liquor bars.
The Dhaka (South) Customs, Excise and VAT Commissionerate issued a claim against the club in 2017 and later a final claim over evasion of VAT. However, the organisation has been delaying the payment of VAT for a long time.
According to the NBR report, from the beginning, Dhaka Club has refrained from filing a written reply against the NBR's claim. It has also used various tactics, such as making unnecessary requests for extensions of time for the submission of dues, and coming up with various excuses, including those related to non-attendance at hearings of the case. As the club did not pay the evaded VAT even after the claim was made by the NBR, multiple notices were issued under Rule 43 of the Value Added Tax Rules 1991.
According to sources in the tax administration, the organisation on February 3 applied for an extension of two months. On behalf of the club, a law firm named MQ & Associates asked for time to pay the dues, citing the Covid-19 situation and mentioning that a decision in this regard would need to be taken through a meeting of the club's executive committee.
In a letter to the NBR, Dhaka Club said it had sought an exemption from arrears as it was a very complicated matter to adjust old sales accounts. The exemption has been sought under Section 56 of the VAT Act. However, no comments were available from any office bearers of the organisation despite repeated efforts to contact them over the phone.