EFD Enforcement: NBR Mandates Smart VAT Compliance for Businesses

Beginning in July 2025, more than 10,000 Electronic Fiscal Devices (EFDs) will replace Electronic Cash Registers (ECRs) across various business establishments in Bangladesh, as part of the National Board of Revenue’s (NBR) efforts to curb VAT evasion.

Initially, the mandate will apply to 27 categories of businesses located in city corporation areas and district towns, requiring the use of either EFDs or VAT Smart Invoices. The listed business types include residential hotels, social and sports clubs, restaurants and fast-food outlets, ready-made garment retail stores, decorators and caterers, electronic/electrical appliance showrooms, advertising agencies, all shops within shopping malls or markets, printing and binding presses, departmental stores, community centers, departmental pharmacies (excluding locally manufactured medicines), sweet shops, general stores/super shops, and gold/silver jewelry outlets.

Other sectors under the mandatory EFD installation include large and medium-scale (wholesale and retail) businesses, furniture stores, mechanical laundries, courier and express mail services, cinemas, beauty parlors, security service providers, health and fitness centers, coaching centers, visa processing or online admission centers, and all other VAT-applicable goods and service providers.

Officials of the VAT Online Project believe this move will significantly enhance compliance and revenue collection. "EFD machines are tamper-proof, unlike ECRs, and all sales data will be directly stored on the VAT Online Project's central server. Any tampering attempt will be automatically detected by the system,” officials said.

According to the NBR’s VAT division, implementing EFDs/SDCs/PKI POS software will ensure transparency in business transactions, thereby reducing opportunities for VAT evasion and increasing state revenue. If VAT evasion is proven, the concerned establishments will face fines or legal action.

“Repeated offenses could even result in business closures,” NBR warned. To avoid penalties and legal consequences, all VAT-eligible businesses are strongly urged to adopt EFDs or compatible fiscal software immediately. Any software platforms found to be complicit in irregularities or revenue leakage will be disconnected, and the respective commissioners will take legal action.

The EFD rollout initially began on August 25, 2020, in five customs, excise, and VAT commissionerates (Dhaka North, South, East, West, and Chattogram). On November 3, 2022, NBR partnered with Genex Infosys Ltd to accelerate the installation of EFD machines in retail outlets. Genex officially commenced operations on August 22, 2023, aiming to monitor sales data from 25 business sectors and ensure accurate VAT collection. However, due to limited voluntary compliance, NBR has now made EFD use mandatory.

Any business that willfully avoids using EFDs will be subject to penalties as per Section 37 of the VAT Act, including a fine equal to half the evaded VAT amount, and additional penalties ranging from a minimum of BDT 20,000 to a maximum of BDT 50,000.