The 5 percent value added tax (VAT) imposed on the online shopping will be applicable only to the commissions and fees charged by the e-commerce agencies, said the National Board of Revenue (NBR).
This means that the shoppers using online platforms will not have to bear the burden of VAT. After selling goods, the e-commerce organisations will pay the tax as a VAT on the transaction of their services.
A directive signed by the First Secretary of NBR (VAT) Hasan Moammad Tarek Rikabder clarified the issue on Sunday.
Rikabder told The Business Standard, "Complications have arisen after VAT on online shopping was introduced in the recent budget. In some instances, this resulted in double taxation. The new directive is issued to resolve this problem."
He also said, "The e-commerce sites usually buy and sell all kinds of products, some of which are exempted from VAT. Meanwhile, for some products, these agencies already pay the VAT when they buy those.
"If VAT is paid for these products again, it will become double taxation and the customers have to bear it. But, as per the new directive, VAT at the buyers' level is removed."
The directive issued by NBR said the e-commerce agencies receive commissions, fees, service charges, and share of revenue from the producers.
If the VAT paid for a product at the source exceeds the VAT required for selling it online, it will be refunded to the e-commerce agencies. But, to get the refund, the agencies have to show a proof of paying the VAT to NBR.
For vegetables, fish, meat and other essential goods, which are exempted from tax, only 5 percent VAT will be applicable to the commissions, fees and service charges for selling these products, said the NBR directive.
People involved in this business fear that imposing VAT on the commissions received for selling products online might harm this sector. E-commerce Association of Bangladesh (eCAB) demanded exemption from taxation for this newly emerging sector.
Shomi Kaiser, president of eCAB, said, "We are working to create at least 1 million jobs in this sector within the next three years. Some countries exempt tax for e-commerce businesses. But imposing tax on the income of the e-commerce organisations in Bangladesh might make it difficult to reach our goal."