Value Added Tax on Purchases for Bangladesh

VAT with Mushak (Challan)

VAT must be charged by a VAT registered vendor on the sale of goods or services or both. A VAT registered vendor is responsible for collecting VAT on their sales which must be remitted to the government account at specified intervals.

VAT charged will be collected from the buyer. The buyer must account for the VAT charged by the vendor in their account books and account the same as a payable liability to the vendor.

VAT without Mushak (w/o Challan)

In cases where a VAT registered buyer makes purchases from a vendor who is not registered under the VAT regime, the responsibility of accounting the VAT liability payable will be with the buyer. This means VAT is self-assessed by a VAT registered buyer on purchases made from vendors who are not registered under the VAT regime.

The standard VAT rate is 15% and for specific transactions VAT at reduced rates could be applicable. There are cases where VAT is completely exempted.

Here is an example where a standard transaction with VAT and WHT applicable for a VAT registered vendor:

#	Particulars	Amount (TAKA)
1	Gross Amount	1000
2	VAT Amount (15%)	150
3	Total Bill Amount	1150
4	Withholding Tax (3%)	30
5	Net Payment to Vendor (Sl.3-4) = (1150-30)	1120
	Other Invoice / liability Amounts:
6	Withholding Tax liability (Tax Authority)	30

Here is an example where standard VAT and WHT are applicable for a VAT unregistered vendor. In such cases, vendor will not apply VAT; the buyer will apply VAT as self-assessed tax. Depending on the applicability, buyer can also collect WHT.

#	Particulars	Amount (TAKA)
1	Invoice Amount as per Vendor	1000
2	VAT Amount (15%) – Self Assessed / RC Tax	150
3	Withholding Tax (3%)	30
4	Net Payment to Vendor (Sl.1-3) = (1000-30)	970
	Other Invoice / liability Amounts:
5	Self-Assessed (RC) VDS Tax liability (Tax Authority)	150
6	Withholding Tax liability (Tax Authority)	30

Using global tax capabilities, you can configure Bangladesh VAT requirements (Purchases with Mushak) for purchases made from registered vendors. The taxes applicable for a transaction can be defaulted to a P2P transaction by appropriately configuring the tax setups and tax rules. The user can modify taxes defaulted with manual intervention.

Requirements for configuring VAT liability to be accounted by the buyer (Purchases without Mushak) where the VAT liability must be accounted and paid to the government by the buyer can be mapped using Oracle ERP Cloud Tax ‘selfassessed’ functionality.

VAT on Purchases in Oracle ERP Cloud

Applicable VAT can be defaulted to the Purchase order/receipt/AP invoice by appropriately configuring the VAT defaulting rules. It is recommended to map the requirements with standard VAT ‘Regime to Rate’ flow configuration, using item category with exemptions for exports/deemed export and so on as needed for defaulting rules at the vendor classification level. For more details, refer to ‘Advisor Webcast’ sessions.

To default taxes in the P2P cycle, Tax Rules can be configured. For details, refer to MOS Doc ID 2399874.2

Customers can also account the VAT charged by the vendor in the AP invoice by manually inserting a tax line with VAT type of tax with the applicable tax rate.

Self-Assessed VAT on Purchases in Oracle ERP Cloud

In case of VAT unregistered vendors, a vendor cannot collect VAT or provide Mushak / Challan. In such a case, the buyer should account the VAT liability and pay the same to government account. This requirement can be mapped by configuring the Oracle ERP Cloud Tax self-assessed capability.

Depending on the volume and business requirement, the self-assessed or reverse charge VAT can be achieved either through manual intervention at the time of invoice entry, by checking the check box or automatic defaulting through specific setup. Setup for self-assessed or Reverse Charge of VAT is much like standard VAT setups where certain additional configurations are required.

It is recommended to go through the documentation listed below:

• MOS document ‘Fusion: How to Setup Self Assessed Tax? (Doc ID 2388005.1)’

• Oracle Fusion Help – Topical Essay ‘Settings That Affect Self-Assessment of Taxes’

Additional configurations required are shown below to make the VAT self-assessed and defaulted automatically at the time of AP invoice transactions.

First Party Tax Registration

Tax Manager > Setup and Maintenance > Setup: Financials > Transaction Tax > Manage Tax Registrations > Search for

LRU Tax Profiles (for example: France Legal Entity) > Create Tax Registration

Tax Manager > Setup and Maintenance > Setup: Financials > Transaction Tax > Manage Tax Rules > Search for

Transaction Tax (B) > Tax Rule type > Tax Applicability Rules> Create New Rules

5.5.2. Illustration of Self Assessed VAT Defaulting

Log in as PAYABLES SPECIALIST role > Payables > Invoices > Create Invoice

5.5.2.1. Sample Screenshot of Reverse Charged Tax on AP Invoice # BD-3