Business firms without Value Added Tax (VAT) registration - also called Business Identification Number - will not be allowed to open letter of credits (LCs) after October 31.
The National Board of Revenue has sent a letter to the Bangladesh Bank requesting it to take necessary steps in this regard.
According to the revenue authority, the initiative was taken in a bid to bring all business entities operating in the country under a single database and ensure revenue collection.
In its letter sent to the central bank, the national revenue board said, despite repeated reminders many business firms are yet to collect Business Identification Number, which is impeding the board's efforts to collect revenue in a proper way.
Against this backdrop, the revenue authority has asked the Bangladesh Bank to take measures so that business firms that will not collect business identification number by October 31 are not allowed to open LCs.
According to the new Value Added Tax Law, no business firm can file VAT return without having a 13-digit VAT registration number. "The revenue authority faces coordination problems if banks issue LC to firms that do not have this registration number," it read.
The revenue board also cannot bring business entities operating without VAT registration under the tax net, the letter said.
Director of the revenue board's VAT Online project Syed Mushfiqur Rahman, who signed the letter sent to Bangladesh Bank Deputy Governor Ahmed Jamal, told The Business Standard, "The revenue authority has extended the deadline for collecting 13-digit business identification number till October 31 after holding discussions with all stakeholders, including the business community."
"The decision to stop LC approval has been taken as part of ensuring punitive action against ones who will not collect the business identification number within this timeframe," he noted.
"The decision will make more business firms come under the VAT registration. This will enable us to include all business entities engaged in export-import activities in the ASYCUDA World," he said.
The Automated System for Customs Data (ASYCUDA) is a computerised system for administering a country's export-import activities. Customs authorities all over the world use this system nowadays.
Syed Mushfiqur also said that already 70,000 business entities have collected their business identification numbers.
According to the national revenue board, having a business identification number is mandatory for all firms having an annual turnover of Tk50 lakh or more.
Business people are also viewing the revenue authority's decision to stop issuing LCs to business firms without VAT registration as a positive initiative.
Abdul Kahleque, director of the Federation of Bangladesh Chambers of Commerce and Industries, said it is the business community that will ultimately benefit from proper VAT registration. This will also reduce hassle in the export-import process, he opined.