E-VAT refund launched amid cautious optimism from traders

The National Board of Revenue (NBR) has launched an online system that allows value-added tax (VAT) refunds to be credited directly to taxpayers' bank accounts, a move officials say will reduce delays and ease long-standing administrative hassles.

Traders and tax experts cautiously welcomed the move, warning that digitisation alone is unlikely to fix chronic delays unless implementation improves.

Under existing regulations, VAT refunds are required to be disbursed within three months. In practice, however, refunds can take up to a year, NBR officials admitted.

NBR Chairman Md Abdur Rahman Khan inaugurated the platform, named "e-VAT", yesterday at the NBR's headquarters in Dhaka by transferring Tk 45.35 lakh to three taxpayers from three VAT commissionerates through the new system.

From now on, taxpayers can apply for refunds online through their monthly VAT returns submitted via the platform. Once the relevant VAT commissionerate verifies the claim, the refundable amount will be credited directly to the taxpayer's designated bank account.

"If refunds can be made without suffering or harassment, there should be no mindset that refunds must be withheld to protect revenue collection," Khan said. "That is not our approach. We want a fully transparent system with no scope for arbitrary discretion."

He said the NBR has so far received 115 online refund applications, of which three have been settled. "The remaining claims will be resolved gradually."

Khan also disclosed that the revenue authority is currently carrying around Tk 4,000 crore in outstanding refund liabilities across taxes and VAT.

"We have launched the VAT refund system now, and the tax refund process will begin soon," he also said.

Khan also said taxpayers would no longer need to repeatedly visit VAT offices to follow up on claims, and that the NBR plans to make VAT return submission mandatory from next year after amending the VAT law.

Meanwhile, business groups and tax analysts broadly welcomed the initiative as a step towards modernising revenue administration, but many cautioned that without strong monitoring, system integrity and institutional accountability, the platform could end up replicating existing bottlenecks in digital form.

Snehasish Barua, a chartered accountant and director of SMAC Advisory Services Ltd, said VAT refunds usually arise when taxes paid at the import stage exceed a firm's actual VAT liability.

"For example, if a business's VAT liability is Tk 20 but it pays Tk 30 as advance tax, the excess Tk 10 is refundable," he said.

Refunds can also result from double VAT deductions on the same service or when exporters pay VAT or advance tax on imported inputs despite exports being zero-rated.

While an online system could make the process easier, Barua said its effectiveness would ultimately depend on the integrity of those operating it.

Speaking on condition of anonymity, an NBR official acknowledged that under the current system, VAT refunds often take six to 12 months, even though annual refund applications typically amount to Tk 450 crore to Tk 500 crore on average.

Exporters echoed similar concerns. Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said the new system could reduce business harassment if it functions as intended.

"If the refund process genuinely goes online, businesses will be encouraged to apply, and we will motivate others to do the same," he said, adding that he had never applied for a VAT refund due to lengthy paperwork, multiple approvals and informal payments.

He also noted that although 100 percent export-oriented factories are entitled to VAT refunds on gas and electricity bills, most avoid applying because the process is cumbersome. "Even when pursued, refunds can take four to five months, or even longer."

Syed Mushfequr Rahman, member of the NBR's VAT audit wing, said the law mandates refunds within 90 days.

"While processing often takes seven to ten days, it must not exceed three months," he said, adding that a 24-point checklist is verified before refunds are approved to ensure compliance with legal requirements.