Bangladesh interim government in its Tk 7,90,000 crore national budget for financial year 2025–26 has proposed both reduction of VAT, tax and duties on a number of items, while their increase on some other items.
Finance adviser Salehuddin Ahmed in his televised presentation of the budget, which is the maiden one of his career, mentioned that under the new budget, to be in effect from July 1, exemptions from VAT would be granted to different local manufacturing sectors, including sanitary napkins, packaged liquid milk, lithium and graphene battery, medicines and computer monitors.
VAT and duties on the import of raw materials for different manufacturing sectors would also be exempted or reduced, he said. VAT exemption threshold for bank deposits has also been raised in the new budget, he added.
In his budget speech, the adviser said that to make the country’s direct tax system modern, fair, taxpayer-friendly and investment-friendly, several significant initiatives were introduced in the fy25–26 budget.
Aiming to introduce a standard system for value added tax and other taxes along with increasing the tax-GDP ratio, VAT and Tax were reduced in some areas, while increased in some others, he mentioned.
Under the new budget, the threshold for VAT-exempted bank deposits has been raised to Tk 3 lakh, which is currently Tk 1 lakh.
The government has also exempted the VAT on importing liquefied natural gas under the new budget.
Also utensils made with leaves, tree extract, clay and textile grade PET (polyethylene terephthalate) chips will be free of VAT.
The proposed budget also exempts locally produced sanitary napkin, packaged liquid milk and ball point pen of the value added tax.
Also, VAT will not be charged till June 30, 2030 on the import of raw materials for sanitary napkins and diapers.
Local production of computer monitors up to 30 inches as well as lease rent of passenger aircraft will enjoy VAT exemption under the fy25-26 budget.
The government under the new budget will also exempt both the import and procurement of raw materials of hospital beds.
Under the new budget, VAT exemption facilities for the production of active pharmaceuticals ingredients have been extended till June 30, 2030. It has also proposed to extend duty exemptions on cancer drugs.
It has also exempted local manufacture of e-bikes from VAT till June 30, 2030. So far local e-bike manufacturers paid 5 per cent VAT.
The new budget has lowered the supplementary duty to 5 per cent from existing 10 per cent on all types of ice cream.
The tax at source on internet services has been lowered to 5 per cent from existing 10 per cent in the new budget.
To prevent accumulation of undisclosed fund in the hands of land sellers and ensure property registration at actual sale value, the source tax collection rate from capital gains on land transfer has been reduced from existing 8 per cent, 6 per cent, and 4 per cent to 6 per cent, 4 per cent, and 3 per cent respectively depending on the location of the land sold.
The existing facilities regarding VAT exemption for the manufacturing stage of general motor cars and motor vehicles will continue, while full exemption from VAT has been granted till June 30, 2030 to the manufacture of general and ICU ambulances, hybrid and electric vehicles.
For lithium and graphene battery manufacturers, full VAT exemptions have been granted at the manufacturing stage till June 30, 2027. From July 1, 2028 to June 30, 2030, they will be exempted of all VAT beyond 5 per cent.
Regarding import of sugar, the proposed budget has suggested lowering the import duty on the item to Tk 4,000 per tonne from existing Tk 4,500 per tonne.
The budget also suggests lowering the custom duty on newsprint paper to 3 per cent from existing 5 per cent.
The budget has also proposed to reduce duties on essential raw materials used in tyre manufacturing. Moreover, reduction in import duties on buses with 16–40 seats and microbuses with 10–15 seats has been proposed.
The interim government, led by chief adviser Professor Muhammad Yunus, aims to collect Tk 5,64,000 crore in revenue and borrow Tk 2,26,000 crore from local and foreign sources to steer the economy out of troubled waters and place it on a path to sustained recovery.
Of the amount to be borrowed, the government plans to borrow Tk 1,25,000 crore from domestic sources and Tk 96,000 crore from foreign lenders.
In his proposal, finance adviser Salehuddin Ahmed has allocated Tk 5,35,317 crore for operating expenditure, and Tk 2,45,609 crore for development expenditure in fy25–26.
The proposed outlay is nearly 1 per cent lower than the Tk 7,97,000 crore budget for the outgoing financial year ending this month.