10yr tax exemption for renewable power producers going commercial between 2025-30
“The initiative will help achieve the target of generating 4,000 MW of electricity from renewable energy by 2030,” Power and Energy Adviser Muhammad Fouzul Kabir, who also attended the meeting, told The Business Standard.
The government has granted a significant incentive to renewable energy investors by extending the tax exemption period from five to ten years as the country strives to reduce its reliance on fossil fuel imports, which cost around $5 billion annually to support gas-, coal-, and oil-based power plants.
Industry insiders say this directive could potentially bring down power prices for consumers.
According to Power Division officials, renewable energy companies that begin commercial power production between 1 July 2025 and 30 June 2030 will be eligible for the extended tax benefits.
After the initial 10-year 100% tax exemption, power producers will pay tax at a rate of 50% for the following three years, and then 25% for the subsequent two years.
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The decision was finalised during an inter-ministerial meeting at the Secretariat on Thursday (14 November), chaired by Finance Adviser Dr Salehuddin Ahmed and Power and Energy Adviser Muhammad Fauzul Kabir Khan.
The meeting was attended by senior officials from the Finance and Power divisions, as well as the National Board of Revenue (NBR).
At the meeting, the government also decided that a 5% advance VAT on imported materials for renewable energy production would be waived upon certification from the Power Division.
According to officials, the NBR may soon issue an official notification in this regard.
4,000MW renewable by 2030
"This decision aims to encourage electricity generation from renewable energy sources. It's a step towards achieving the goal of producing 4,000 megawatts of renewable energy by 2030," Power and Energy Advisor Muhammad Fauzul Kabir Khan told TBS.
The interim government has taken steps to re-evaluate renewable projects since it assumed power on 8 August shortly after the fall of Sheikh Hasina's administration.
Last month, letters of intent for 31 renewable power projects, totalling 2,678 megawatts, were cancelled. Solar power producers say these projects could have replaced $820 million in fossil fuel imports and created 10,000 direct jobs.
On 29 October, the NBR issued a circular announcing that renewable energy companies will get a five-year 100% tax exemption. The extension of the exemption to 10 years comes just 15 days later.
Currently, the country's renewables are 603MW from solar, 50MW from wind, and 230MW from hydropower.
Electricity is also produced from biogas and biomass, but the amount is minimal and these sources are not connected to the national grid. The government is also planning to generate electricity from waste, including household waste.
Power Division officials said that to meet the 2030 energy goals, the interim government will soon issue tenders for 40 renewable-based power plants, adding around 1,000 MW to the grid.
They said the government is also seeking foreign investment, having engaged with companies from various countries. Chief Adviser Muhammad Yunus is focusing on the "Three Zero" strategy: zero carbon emissions, zero unemployment, and zero poverty.
Golam Baki Masud, general secretary of the Bangladesh Solar Module Manufacturers Association, told TBS that the extension of tax exemptions and VAT waivers is encouraging for investors in renewable energy projects.
This would attract new investments and lead to lower power prices, marking a positive development overall, he added.
Import-based power strains the economy
Currently, the majority of electricity in the country is generated from gas-based power plants. Due to an insufficient domestic supply of gas to meet the demands of power plants, costly LNG is being imported. Next in line is power generation from coal-based plants, alongside plants that use furnace oil and diesel.
In other words, much of the raw material for power generation in the country is dependent on imports. Additionally, electricity is being imported from abroad, requiring significant foreign currency expenditure each year. This is putting pressure on the country's economy.
Sectors currently enjoying tax holidays
According to the NBR, several sectors are currently benefiting from tax holidays. These include agricultural machinery, automatic bricks, automobiles, bicycles, furniture, leather and leather products, LED TVs, home appliances (like refrigerators), toys, mobile phones, pharmaceuticals, tyres, and textile machinery.
In addition, various services in the information technology sector are also receiving tax exemptions, such as software development, software application customisation, digital content development and management, digital animation, website development, website services, overseas medical transcription services, and call centre services.
Tax holidays are also granted for the construction of some major infrastructure projects.
