Uncertainty over the National Board of Revenue’s (NBR) decision on whether construction-sector contractors may pay the standard 15 per cent value-added tax has triggered widespread complications in securing VAT clearance certificates—an essential requirement for receiving payments, processing bank documents and executing government projects.
Contractors said they are ready to pay VAT at the standard rate and have formally requested permission from the NBR, but the tax authority has yet to issue a clear directive. The delay, they said, has resulted in stalled payments, disrupted project timelines and mounting financial losses for many firms.
Some contractors have already approached the High Court seeking intervention. In view of the urgency, the court has ordered the NBR to settle the matter within 15 working days.
According to NBR data, the construction contracting sector contributes around Tk10,000 crore in VAT revenue annually. The applicable rate for contractors was previously 7.5 per cent, later raised to 10 per cent in the latest national budget. The NBR has signalled plans to gradually move the sector to the standard 15 per cent rate.
Several contracting firms recently deposited VAT at the 15 per cent rate and applied for clearance certificates. However, field-level VAT offices rejected the claims on the grounds that contractors are required to pay VAT at the currently applicable 10 percent rate, not the standard rate.
Seeking clarity, industry players wrote to the NBR. The prolonged lack of response ultimately prompted Momen Construction Ltd to file a writ with the High Court, which then directed the NBR to reach a final decision within 15 working days.
Md Ahsan Habib, managing director of Momen Construction Ltd, told The TIMES, “In June, we deposited Tk85,42,668.67 to the government treasury based on our VAT 6.3 invoices. Although we submitted all VAT-9.1 documents to the concerned VAT office, they said they could not trace the deposit.”
He added that VAT officials informed the company that, as a contracting entity, it was not eligible to pay VAT at the standard 15 percent rate.
“We later filed a writ petition, and the High Court instructed the NBR to resolve the matter within 15 working days. The NBR has now called a meeting on Sunday. We hope a clear decision will emerge,” he said.
NBR officials, however, said contractors prefer the standard 15 percent system mainly to become eligible for input tax credits. If these rebates are applied, they argue, contractors’ effective VAT liability could fall to 5–6 per cent, reducing government revenue.
Under Section 15(3) of the VAT and Supplementary Duty Act, 2012, any registered entity may opt to pay VAT at the standard 15 per cent rate instead of reduced rates, provided it follows the “prescribed procedure.” Officials said defining this procedure rests solely with the NBR, which may issue instructions at any time.
Md Badruzzaman Munshi, second secretary (VAT Policy) at the NBR, said the revenue authority is working to gradually shift most reduced-rate sectors to the standard 15 per cent model.
“We need cooperation from businesses to implement this transition,” he told TIMES.
Asked whether allowing rebates would reduce revenue collection, he said revenue considerations are not the only factor guiding VAT policy.
“The goal is to ensure a simple, transparent system in which taxpayers can comply easily,” he added.
