The Appellate Division of the Supreme Court has ruled that products, including edible oil, sugar, cement, and iron, manufactured in the country鈥檚 economic zones are not exempted from value-added tax, overturning a High Court verdict that had declared such taxation illegal.
A three-member bench comprising Justice Md Ashfaqul Islam, Justice Md Rezaul Haque and Justice SM Emdadul Hoque delivered the full verdict on March 3.
The judgment was released past week on the Supreme Court鈥檚 official web site.
The apex court upheld the legality of a 2020 circular issued by the National Board of Revenue, which withdrew the previously granted VAT exemptions for specific goods produced in economic zones.
This decision nullified the High Court鈥檚 2021 ruling that favoured companies operating in Meghna Group鈥檚 City Economic Zone in Narayanganj.
The appeal was filed by the NBR, challenging the High Court鈥檚 judgment that responded to a batch of writ petitions from companies, including City Edible Oil Ltd, Sonargaon Steel Fabricate Ltd, Meghna Sugar Refinery Ltd and Aman Cement Ltd, all linked to the Meghna Group in which Mustafa Kamal is the chair.
These companies had been granted a 10-year tax exemption through a statutory regulatory order issued on March 23, 2019 and scheduled to remain effective until October 2, 2026.
However, an SRO issued by the finance ministry on March 25, 2020, and published in the gazette on May 10, 2020, excluded several key commodities from the purview of this exemption.
The companies argued that they had set up operations in the economic zones based on the assurance of long-term fiscal benefits, as mandated by the Bangladesh Economic Zones Authority (BEZA) Act, 2010.
They claimed that the BEZA鈥檚 governing board had approved such exemptions in 2015, and that the finance ministry was bound to implement this policy through the 2015 SRO issued under Section 44(4)(b) of the Income Tax Ordinance, 1984.
However, the Appellate Division rejected the argument that the BEZA鈥檚 directive could override the fiscal authority of the finance ministry.
The court held that tax exemptions were discretionary, subject to statutory conditions, and not absolute entitlements.
It observed that the government retains sovereign power to amend, withdraw, or modify exemptions in line with public interest, revenue concerns, or policy realignment unless there is a binding legal commitment to the contrary.
The court emphasised that the doctrine of promissory estoppel 鈥� which prevents a party from reneging on a promise 鈥� does not apply to fiscal policy decisions unless those promises are backed by statutory guarantees or contractual obligations.
鈥楾he Ministry of Finance, while issuing the 2020 SRO, acted within its legal authority,鈥� the verdict noted. 鈥楾ax exemptions are policy tools, not vested rights. Unless contractually assured, such benefits can be withdrawn at any time.鈥�
The ruling further clarified that while exemptions were generally offered to encourage investment and development, such incentives must be balanced against the broader public interest.
鈥楪overnments are not estopped from reviewing or withdrawing incentives if continuation causes market distortions or concentrates benefits among a few entities,鈥� the court added.
Company law expert Mohammad Abdul Hannan said that the verdict sent a strong message to investors and economic zone operators that tax benefits must be understood as conditional policy instruments, not guaranteed entitlements.
