Metro rail gets VAT exemption till December 2025

The National Board of Revenue has extended its VAT (value-added tax) exemption for the Dhaka metro rail till the end of this year.

The metro rail is the "most modern and popular public transport in Bangladesh, significantly contributing to reduced commuting times and playing a crucial role in alleviating traffic congestion …," the NBR said in a circular issued today (6 January).

Due to the above-mentioned reasons, the revenue board deems it necessary to "reduce travel costs" by utilising the train service.

The exemption will stay effective till 31 December 2025, the circular noted.

Under the current VAT and Supplementary Duty Act, a 15% VAT is levied on air-conditioned transport services. 

To promote the use of public transportation among city dwellers, Dhaka Mass Rapid Transit Company Limited (DMTCL) requested the National Board of Revenue (NBR) to exempt metro tickets from VAT. In response, the revenue authority waived VAT on metro fares until June 2024.

However, the NBR chose not to extend the VAT exemption beyond the deadline and informed DMTCL of this decision on 4 April. 

Despite this, the VAT was not implemented, and the metro service continued to benefit from the exemption until December 2024.

During an inter-ministerial meeting on 4 July last year, DMTCL Managing Director MAN Siddique requested a deferral of VAT on metro rail fares until 2032, citing challenges in VAT collection. 

The DMTCL authority said the current fare would need to include the VAT amount to ensure proper collection. However, the existing ticket machines, each valued at Tk1 crore, are not designed to handle this adjustment. Replacing these machines would be both expensive and time-consuming.