Eight items, including medicine, mobile-phone usage and internet-service providers, are spared from the just-hiked VAT and supplementary duty (SD) as the government backtracks amid stakeholder discontent.
The other items relieved of tax rises are non-AC hotel, restaurant, motor garage and workshop, sweetmeat shops, and brand and non-brand dresses.
On January 9, 2025, the government increased the indirect taxes on nearly 100 products and services through an ordinance to boost domestic revenue receipt and thus meet the conditions set by the International Monetary Fund (IMF) in a lending package.
The decision on reinstatement of the original rates of the taxes came following concerns and agitations from cross-section of people, including local and foreign investors.
Officials of the National Board of Revenue said the proposal to spare eight items was approved by the NBR chairman on Thursday.
"We will send the draft Statutory Regulatory Order (SRO) for vetting by the law ministry soon," says a senior VAT official.
Increasing the value-added tax in the trading stage of medicines, from 2.4 per cent to 3.0 per cent, has created concern among common people as it might fuel out-of-pocket expenditure.
Bangladesh Association of Pharmaceutical Industries (BAPI) president Abdul Muktadir in a letter to the NBR chairman on January 14 expressed concerns over the hike that may force the pharmaceutical industries to pay VAT at a rate of 18.75 on medicines while standard VAT rate is maximum 15 per cent.
Demanding reinstatement of the 2.4-percent VAT, Mr Muktadir said the tax on medicines is already, on average, 15 per cent with 2.4-percent trade VAT.
He wrote the previous VAT rate itself is not a reduced one as it has been calculated on value addition at trade stage on trade price.
Meanwhile, restaurant owners staged a demonstration on Tuesday morning in front of the NBR bhaban in Agargaon to demand that they be exempted from VAT.
Supplementary Duty on mobile-phone usage was 20 per cent which was increased to 23 per cent in the ordinance.
The SD rate on broadband internet would remain 5.0 per cent, discarding the latest 10-percent hike.
Mohammad Belal Hossain Chowdhury, member (VAT policy) at the NBR, says the government has reconsidered the tax hike in view of misery of the common people in the wake of mounting inflationary pressure stemming from food items.
"The NBR has tried to focus on revenue-generating sectors to increase revenue in the next six months. And since mobile talk-time is one of the major contributors, it came under the purview of tax hike," he adds.
The VAT rate on restaurants would be down to the previous 5.0 per cent from 15 per cent.
However, he says, three-star to five-star hotels will remain under the 15- percent rate as they are able to claim input-tax credit.
"We will issue an order in this regard soon," says the revenue official about the course correction. Also, the NBR has scrapped the import taxes on e-book imports and supplies.
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