Configuring & using VDS



The current standard rate of Value Added Tax in Bangladesh is 15% of the goods or service price. Other than this rate there is some truncated value based preferential rates on some services. At present the following preferential rates are applicable by Statutory Rules and Order 1.5%, 2%, 3%, 4%, 4.5%, 5%, 5.5%, 6% and 9%.

All the rules and regulations regarding VAT deduction at source can be divided into three parts, viz: (1) who will deduct VAT at source, which are the services requiring VAT deduction at source and the rates of such deduction and which are the services do not requiring VAT deduction at source; (2) Following VAT deduction at source how it has to be deposited to the government treasury and how certification of deduction has to be issued in form “Mushak-12kha”; and (3) how the VAT deducted at source amount can be shown in the relevant serials and columns of the VAT return. 




VDS Rate

                                                                                                                                                              

Organizations upon which the responsibility of VAT Deduction at Source lie:  

Nine organizations have been given the responsibility to deduct VAT at source.

Those are as follows:

 

(1)   Government organizations;

(2)   Semi-Government organizations;

(3)   Autonomous bodies;

(4)   Non-Government Organizations (NGOs);

(5)   Banks;

(6)    Insurance companies;

(7)   Financial institutions;

(8)   Limited company (both private limited company and public limited company but not proprietorship firm);

(9)   Educational institutions (all types of educational institutions form KG, nursery to university both public and private);


 

It is worth mentioning here that the service of English medium school is VAT-able. That must not be equated with VDS. VDS is deducted from the purchase of goods and services while making payment. On the service of English medium schools, VAT is to be collected along with tuition fee and to be paid to the Government treasury by the school authorities. VAT remains imposed on the English medium schools where 2 foreign curricula are taught in English medium. If our national curricula are taught in the English medium, VAT will not be imposed there. When these organizations make payment against their purchase, it is to be examined whether there lies the obligation for deducting VAT at source. If there is an obligation, VAT requires to be deducted from the bill while making payment. In spite of having the obligation of VAT deduction at source if VAT is not deducted at source then the uneducated VAT will have to be realized from the organization not deducting VAT with two percent monthly simple interest. If VAT is deducted at source but not deposited to the government treasury within the specific time (presently 15 working days), then the undeposited money is to be deposited with two percent monthly simple interest and a monetary penalty worth about Taka twenty five thousand each can be imposed upon the person who has deducted VAT at source and upon the person who was responsible for depositing the money to the government treasury and upon the chief executive of the organization. So, the persons serving in these organizations in accounts, audit, procurement, supply chain management, bills payable, etc. sections need to have transparent updated knowledge regarding VAT deduction at source. (SOURCE: NBR)


Step 1. To pre-configure a VAT Deduction at Source (VDS) percentage setting for a Product/Service:

 Go to Accounting & Finance (AF)> Click on Master Data

Click on Products >Click on Add New



The product details will be displayed, click on Defaults as shown below:

 

VDS Details:

 

VDS Rate: Enter Vat Deduction  Percentage.

TDS Profile: Leave Blank

Click on Update to save & insert the VDS defaults.

 


Step 2. Transactional Purposes Purchase invoicing: Go to Accounting & Finance (AF)> Click on Transactions



Click on Purchase Invoices> Click on New>Select Purchase Invoice.



A new Purchase Invoice details window will be displayed as shown:


Purchase Invoice Product Details: 

Purchase Invoice No: Auto-generated by the system.

Customer: Select a customer name.

Date: Select & set the Invoice date. 

Reference: Enter reference title/name.

Currency: Select the Purchase Invoice payment currency.

Exchange Rate: Enter exchange rate currency conversion amount.

Insert Line Item details: 

Product: Select a product.

Description: Product details are auto displayed.

Quantity: Enter the Product quantity.

Price: Enter the product price.

Tax Code: Select a Tax code. 

Sales Discount: Select Purchase Discount percentage.

Net Amount: Auto-calculated by the system.

VAT Amount: Auto-calculated by the system.

SD Amount:  Auto-calculated by the system.

Select and Set the Expiry date

Set the warehouse location from the drop-down menu.

Click on Add to List to update.


 

An example of a completed purchase invoice has been provided below:

 

 

Step 3. Update the ledger: Select the Purchase invoice>Click on Update Ledger. (Successful Confirmation will be displayed). The status will be displayed as posted.



 To View, the purchase invoice Click on Document No (Prefix: PINV)



The Purchase Invoice Details will be displayed as shown below:



Step 4. Making Payments to Supplier: Go to Accounting & Finance (AF) Module> Click on Transactions 



Click on Payments >Select To Supplier



Click on New Payment.



The New Supplier Payment details window will be displayed:


 

Supplier Payment Details:

 

Supplier: Select New Supplier Name.

Account: Select the payment account.

Date: Select the payment date.

Reference: Provide the payment reference & click on save

VDS Amount:  VDS (VAT deducted at source) figure is auto-generated after supplier selection.

VDS Deduct:  VAT deducted at source after supplier Selection

Discounted:

Gross Payment: Enter the payment amount before deduction.

Discount: Auto-generated after supplier selection

Net payment: Enter the payment amount after deductions.

 


Go back to the payments to the supplier landing page and select the Supplier payment and click on the Update ledger button. The status will be displayed as posted.


 To View, the payment voucher Click on Document No (Prefix: PINV)



The payment voucher will be displayed as shown:



To view Supplier activity: Go to Accounting & Finance and Click on Master Data.



Click on Suppliers,



Then select the Supplier and click on the edit button to display details



The Supplier details will be displayed, Click on Activity :



 The Supplier Activity details will be displayed, (To View documents: Click on Document Number):



To View in the Chart of Accounts: Go to Chart of Accounts (COA)> Click on Tax/VAT Deduction at Sources>Click Va deduction at Source, then Click on view Ledger to display the search details:



The view Ledger details will be displayed:


Users must set a start date and an ending date and select a search option from the drop-down menu:



The Ledger details will be displayed as shown: