Bangladesh 2025-26 Budget: Key VAT Measures and Response to US Tariffs

June 13, 2025

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The Bangladeshi Interim Government, which assumed responsibility for running the country following the July 2024 Mass Uprising, released its National Budget Speech for 2025-26 on June 2, 2025, nearly 10 months after the new government was established.

The Budget Speech includes provisions and changes relating to direct taxes, as well as VAT and import-export duties. In addition to this, the Budget Speech also proposes measures to counter 37% US tariffs on Bangladeshi exports imposed by the Trump administration.

Key VAT Measures from the Budget Speech

The Interim Government emphasized that VAT is one of the most significant revenue generators, noting that reducing the compliance gap and simplifying the VAT accounting system are among the most crucial issues considered in preparing the government budget.

To achieve the VAT revenue target, the Interim Government decided to reduce the applicable advance tax rate for industrial raw material imports from 3% to 2%, and to increase the applicable advance tax rate from 5% to 7.5% for commercial importers.

Government, semi-government or autonomous organizations, banks, insurance companies, and individuals or organizations filing zero returns now have 20 instead of the previous 15 days to file a tax return from the end of the tax period.

Furthermore, the Interim Government also extended the adjustment period for advance tax adjustment, refund application, and taking input VAT rebates from four to six months. Additionally, the applicable VAT rate for online product sales commission has been increased from 5% to 15%.

Additionally, the list of VAT and excise duty exemptions has been extended to include the import stage of Liquefied Natural Gas (LNG), as well as the production and business levels of computer monitors up to 30 inches in size, rather than the previous limit of 22 inches. Furthermore, the lease rent of aircraft used for passenger transport has also been included in the list.

Regarding the countermeasures to the US tariffs and in preparation for trade negotiations with the US, the Interim Government proposed a comprehensive reduction in import-related taxes and duties. These measures include a complete withdrawal of import duties on 110 products and a reduction in import duties on an additional 65 products.

Conclusion

As the Interim Government works on rebuilding the country after the 2024 Mass Uprising and eliminating the adverse effects that these political happenings have had on the state budget and economy, the National Budget Speech for 2025-26 proposes, for the first time in the country's history, a cut in the national budget's absolute size. Overall, the Budget Speech places more emphasis on education, health, good governance, civic facilities, and employment than on achieving ambitious GDP targets and undertaking mega projects.

Source: Ministry of Finance and Ministry of Science and Technology - National Budget Speech 2025-26

What are the key VAT changes in Bangladesh's 2025-26 budget?

The budget includes reducing the advance tax rate for industrial raw material imports from 3% to 2%, increasing the VAT on online product sales commissions from 5% to 15%, and extending VAT exemptions to LNG imports and larger computer monitors.

How has the government addressed VAT compliance in the 2025-26 budget?

The Interim Government aims to reduce the VAT compliance gap by simplifying the VAT accounting system and offering a longer filing period for zero-return filers, extending the deadline from 15 to 20 days.

What measures have been taken to counter the 37% US tariffs on Bangladeshi exports?

The Interim Government proposed reducing import duties by removing duties on 110 products and reducing duties on an additional 65 products as part of trade negotiations with the US.

How has Bangladesh's Interim Government altered VAT and excise duty exemptions?

The government has expanded VAT and excise duty exemptions to cover LNG imports, larger computer monitors (up to 30 inches), and the lease rent of aircraft used for passenger transport.

What is the focus of Bangladesh's 2025-26 national budget?

The budget emphasizes education, health, good governance, civic facilities, and employment, with a focus on rebuilding the country post-2024 Mass Uprising rather than GDP growth or mega projects.

How does the 2025-26 budget address the overall size of national expenditure?

For the first time, Bangladesh's budget proposes a cut in the national budget's absolute size, focusing more on social and civic infrastructure rather than large-scale projects.

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