VAT registration may become mandatory for business bank accounts

The National Board of Revenue (NBR) is considering linking VAT registration – known as a Business Identification Number (BIN) – to bank accounts, aiming to bring businesses with trade licences but without VAT registration under the tax net.

Under the proposed measure, businesses may be required to provide a BIN when opening or continuing current accounts in banks. According to NBR sources familiar with the budget, a provision in this regard may be included in the upcoming national budget.

If fully implemented, the policy could compel tens of thousands of small and large businesses to register for VAT, with the primary goal of expanding VAT coverage.

However, business owners and bankers have expressed concerns that mandatory BIN verification for bank accounts could discourage businesses from opening accounts or depositing funds. Many business owners are reportedly reluctant to register for VAT due to bureaucratic complexity and potential harassment.

A senior NBR official, speaking on condition of anonymity, told The Business Standard, "A large number of businesses, which are legally supposed to be under VAT, remain unregistered. To bring them under the tax net, making registration mandatory for opening a current account is being considered."

He added, "If approved by the finance minister, this could be included in the next budget and implemented from the next fiscal year." 

Another official noted that even existing account holders may be required to undergo BIN verification.

According to NBR data, there are currently 7,92,000 VAT-registered entities in the country, of which about 5,00,000 file returns. 

Estimates from the Bangladesh Shop Owners Association show that nearly 70 lakh shops hold trade licences, while many other businesses and service providers remain outside the VAT net. Moreover, not all of these businesses maintain current accounts.

According to estimates by the Bangladesh Shop Owners Association, nearly 70 lakh shops hold trade licenses, while there are many businesses and service providers that are still outside the VAT net. Not all of these businesses maintain current accounts.

Another NBR official said, "Small-scale businesses with low-value transactions are not our target. This initiative is aimed at businesses with current accounts and significant transaction volumes, to track turnover and ensure applicable VAT is collected."

Regarding concerns that businesses might sidestep monitoring through alternative accounts, the official noted, "Savings accounts have transaction limits. If fully implemented, these loopholes can also be addressed."

Business owners, however, voiced opposition to the plan. Arifur Rahman Tipu, general secretary of the Bangladesh Shop Owners Association, told The Business Standard, "If BIN becomes mandatory for opening or managing bank accounts indiscriminately, businesses may be discouraged from using banks, depositing money, or conducting transactions."

He added, "Forcing small businesses to register for VAT will increase their costs and could potentially drive them out of business. The complexity of the system and harassment discourage registration."

Bankers echoed these concerns. Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank Limited, said, "Customers are already hesitant to deposit money due to bank charges and excise duties. Making BIN mandatory for businesses could further discourage account openings, prompting them to keep money elsewhere."

He suggested that the government focus on increasing direct taxes rather than imposing mandatory BIN requirements on bank accounts.