One taxation expert has refused to buy into the clarification of the NBR in regard to who will pay the 7.5 percent VAT.
The National Board of Revenue says the universities will pay the government this tax at the set rate from the tuitions fees they charge their students. VAT would not be separately realised from the students.
But a former top official with the revenue board has questioned whether this directive is compatible with the basic idea of VAT.
He wondered if the burden of value-added tax could be imposed on education, which is a fundamental right of a citizen.
“The main philosophy of the VAT law is that one who buys the service pays tax. Since complications have arisen over the issue, I believe the NBR has offered an explanation to cool down the situation.”
The students have been protesting since the government imposed 7.5 percent VAT on tuition fee at private universities, and medical and engineering colleges in the budget for 2015-16 fiscal.
They say it will hit middle and lower income families and curb the basic right to education.
The students of private universities poured onto the streets throughout Thursday to stage demonstrations, bringing Dhaka City to its knees.
The government, seemingly unwavering on its stance, suddenly swung into action as the protests raged.
The National Board of Revenue (NBR) in the afternoon clarified the VAT in a statement.
“The existing tuition fees include the VAT. The responsibility to pay the amount lies completely with private university authorities and not the students in any manner,” it said.
The statement also clarified there was ‘no scope’ to hike tuition fees.
Finance Minister AMA Muhith, who has been critical of the demonstrating students, spoke in same tune afterwards.
“The universities will have to pay the money. They can easily pay it since they charge students high,” he told a programme in Sylhet.
“But they won’t be able to hike any fee,” he added.
BRAC University students lifted the blockade on the street from Gulshan to Mohakhali when Registrar Sohul Afzal told them that the authorities, not the students, would pay the VAT following the NBR decision.
Students of East West University and North South University made similar announcements and left the streets at Rampura and Norda respectively.
Prime Minister Sheikh Hasina told Parliament: “The students won’t have to pay the VAT. The university authorities will pay. They have admitted it.”
Ruling Awami League’s rival BNP, however, doubted the government’s clarification.
Spokesperson Asaduzuman Ripon told a press conference: “To pay the VAT, the institutions will hike tuition, semesters, laboratory and other fees.”
While proposing the budget for 2015-16 fiscal year in June, Muhith said, “Although VAT at a truncate rate of 7.5 percent is currently levied on English medium schools; private universities, and medical and engineering colleges are still beyond the boundary of the VAT net.”
He proposed a 10 percent VAT on these institutions but cut it to 7.5 percent later after discussions.
In his 2015-16 budget proposal in June, Muhith said, “Although VAT at a truncate rate of 7.5 percent is currently levied on English medium schools; private universities, and medical and engineering colleges are still beyond the boundary of the VAT net.”
He proposed a 10 percent VAT on these institutions but cut it to 7.5 percent when the budget was passed following protests.
In the Statutory Regulatory Order (SRO) issued on July 1 on the matter, the NBR said these institutes would have to pay 7.5 percent value-added tax on 50 percent of their income.
The tax on the universities’ income is termed ‘VAT’ here, with which many of the experts do not agree.
NBR Chairman Nojibur Rahman declined comment on the matter saying a statement already addressed it.
When asked to enlarge the clarification, he said, “The tuition fee the students give to the universities includes the VAT. The authorities will take it out and pay it. The students do not need to be agitated.”
An income tax lawyer, who has many important clients, did not agree.
“The consumer who receives the service will pay the VAT. Here in the case of private universities, the authorities provide service, the students receive it. The institution can’t pay here,” he told bdnews24.com, requesting anonymity.
“It is an important question why the institutions will pay the VAT in case of private universities when the consumers are paying VAT in all other cases. This is an aberration,” he said.
“I think the government or the NBR gave the clarification to tackle the situation. It’s not a legal explanation,” he added.
A former top NBR official questioned VAT on education.
“It’s a basic question. Education is a right. No disparity should exist in getting that right, where some will pay Tk 12 for it and some others will have to spend more,” he said.
Like many others, he thinks the students will have to shell out the money in the long run no matter what clarification the NBR issues.
