Under pressure from the International Monetary Fund (IMF), Bangladesh’s interim government is set to amend the Value Added Tax (VAT) and Supplementary Duty Act. According to the draft of the Value Added Tax and Supplementary Duty (Amendment) Ordinance 2025, higher VAT and duties may be imposed on 65 types of goods and services, including mobile phone usage (talk time) and airline tickets.
Despite the planned VAT hikes, Economic Advisor Salehuddin Ahmed stated that the impact on the prices of essential commodities would be minimal. Addressing reporters after the Cabinet Committee on Government Procurement meeting on Thursday, the advisor said, “This will not have a significant impact on the prices of essential goods. We have zeroed out duties on essential items. Consider the exemptions we’ve provided. The main indicators of inflation—such as rice and lentils—will remain unaffected. The items for which we are increasing taxes are less important in driving inflation.”
Sources have indicated that the draft ordinance was given preliminary approval during the Advisory Council meeting on Wednesday, January 1, pending vetting by the Legislative and Parliamentary Affairs Division. Since taxes cannot be increased without parliamentary approval, the changes will be enacted through a presidential ordinance. This ordinance is expected to be issued next week.
The draft proposes adjustments to VAT thresholds for businesses. Under the new system, businesses with an annual turnover of BDT 3 million to 5 million will be required to pay turnover tax. Currently, turnover tax applies to businesses with annual revenues between BDT 5 million and BDT 30 million. Additionally, businesses exceeding the annual turnover threshold of BDT 5 million will be subject to a 15% VAT on the sale of goods and services.
Excise duties on travel may also increase, leading to higher air travel costs. For domestic flights, the excise duty could rise from BDT 500 to BDT 700. For international travel, excise duty for travel to SAARC countries may increase from BDT 500 to BDT 700, while for non-SAARC countries within Asia, the duty could rise from BDT 2,000 to BDT 2,500. For Europe and the Americas, the excise duty may increase from BDT 3,000 to BDT 4,000.
Reports suggest that the IMF has set a condition for Bangladesh to increase the tax-to-GDP ratio by 0.2%, amounting to over BDT 120 billion. This additional revenue will be incorporated into the government’s revenue target for FY 2024-25, which currently stands at BDT 4.8 trillion.
