Legal Framework for Input Tax Credit (ITC)
The Statutory Role of Mushak 6.3
Under Rule 40 of the VAT Rules 2016, a 'Tax Invoice' (Mushak 6.3) is the mandatory document for transferring VAT liability and claiming credit. Without a valid Mushak 6.3, a registered person is legally barred from claiming ITC under Section 46(1).
| Compliance Element | Statutory Provision | Legal Requirement |
|---|---|---|
| ITC Eligibility | Section 46 | Must be for business activities and supported by Mushak 6.3. |
| Tax Invoice (Mushak 6.3) | Rule 40 | Issued at the time of supply; must contain BIN and description. |
| Credit Time Limit | Section 46(3) | Must be claimed within 4 tax periods (months). |
| Partial Input Credit | Section 47 | Apportionment required for mixed taxable and exempt supplies. |
Operational Workflow for VAT Compliance
Mandatory Conditions for Claiming ITC
- Registration: The claimant must be a registered person under Section 4 or 5 of the Act.
- Banking Channel: For transactions exceeding BDT 100,000, payment must be made via banking channels as per Section 46(2).
- Documentary Evidence: Possession of a valid Mushak 6.3 or a Bill of Entry (for imports) is non-negotiable.
- Direct Link: The inputs must be used for taxable supplies; inputs for exempt supplies are ineligible for credit under Section 47.
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Schedule ScopingFrequently Asked Questions
What is the time limit to claim Input Tax Credit?
According to Section 46(3) of the Value Added Tax and Supplementary Duty Act 2012, a registered person must claim the input tax credit within 4 (four) tax periods (months) from the date the tax became payable.
Can I claim ITC if I pay in cash for large transactions?
No. Under Section 46(2) of the Act, if a payment for a supply exceeding BDT 100,000 is made other than through a banking channel, the input tax credit shall not be allowed.
Is Mushak 6.3 required for every sale?
Yes, under Rule 40 of the VAT and SD Rules 2016, every registered supplier must issue a Tax Invoice (Mushak 6.3) at the time of supply to ensure the buyer can claim ITC.
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