Govt increases VAT, SD for 90 products, services

The government has raised the value added tax (VAT) and supplementary duty (SD) on over 90 products and services, including fruits, juices, beverages, tobacco products, restaurants, mobile talk time and internet.

The hikes, which came into effect from yesterday, were approved through a presidential ordinance, according to a gazette notification published late yesterday evening.

As per notification, excise duties on airfares for both domestic and international destinations have been significantly increased as well.

VAT has been hiked to 15% from the previous 5% for items like potato flakes, biscuits, pickles, chutneys, various pastes, LPG, bulk-imported petroleum bitumen, ferro-manganese and ferro-silico-manganese alloys, ferro-silicon alloys, CR coil sheets from HR coils, electric transformers, eyeglass frames, and indenting agencies.

It has also been increased for kitchen towels, napkins, hand towels, non-AC hotels, and locally branded clothing items from 7.5% to 15%.

Products and services that will now be subject to 15% VAT instead of 10% include motor vehicle garages, dockyards, film studios and cinemas, repair and maintenance services, tailoring shops, building and grounds maintenance agencies, and social or sports clubs. 

Additionally, VAT has been increased for medicine traders, LPG gas traders, and stage-based local traders.

Supplementary duties have been increased by over 50% for 41 products and services, including mobile talk time and internet, imported fruits, fruit juices, paints and varnishes, raw materials for leather and footwear, detergents, and non-carbonated artificial flavoured drinks. 

Carbonated and non-carbonated beverages are now subject to fresh supplementary duties, 30% and 15% respectively, and a fresh 10% SD has also been imposed on ISPs.

Tobacco products, hotels, and restaurants will also face a higher supplementary duty from now on. 

The price for tobacco products have also been increased across four segments, ranging from the lower to the premium tiers. The new prices for 10 sticks are set at Tk60, Tk80, Tk140, and Tk185, which were previously Tk50, Tk70, Tk120, and Tk160, respectively. 

Additionally, supplementary duty on tobacco has also been raised to 67% across all segments.

'Will slow progress'

Tanveer Mohammad, chief corporate affairs officer of Grameenphone, said, "We are surprised by the sudden 3% increase in supplementary duty (SD) on mobile services. With the economy still recovering and inflation over 10%, this extra cost adds more strain on consumers who are already struggling. 

"This is the second time in seven months that SD has been raised—first by 5% in June 2024, and now by 3%. This means a 9.2 percentage point increase in indirect taxes on customers in just seven months."

He added, "For every Tk100 spent on mobile services, customers will now pay Tk142.45 (including VAT, SD, and surcharge), up from Tk133.25 before the last budget. 

"As an industry dedicated to digital inclusion, we believe this move will slow progress and deepen the digital divide. We urge the government to rethink this decision in the interest of customers and the goal of a digitally inclusive society."

'Unreasonable'

SM Nazer Hossain, vice president of the Consumer Association of Bangladesh, told TBS, "It is unprecedented to raise taxes like this in the middle of the fiscal year. 

"While the government claims these are not essential items, everything except cigarettes is closely tied to people's lives. This will increase the cost of living and fuel inflation. In the end, it will negatively affect people's lives."

He added, "People are already dealing with high inflation. Raising taxes in the middle of the fiscal year like this is completely unreasonable."