VAT in bangladesh
Modern VAT in Bangladesh With New Features
Value Added Tax (VAT) is the primary source of internal revenue for the Government of Bangladesh, contributing more than half of the total tax collected by the National Board of Revenue (NBR). Governing the modern economy since the introduction of the VAT and Supplementary Duty Act, 2012, the system has transitioned significantly toward digitization.
As of early 2026, here is a comprehensive guide to the VAT landscape in Bangladesh.
1. VAT Rates and Structure
Bangladesh follows a multi-tier VAT structure. While the standard rate is applied to most goods and services, several reduced rates exist to protect local industries and consumers.
Standard Rate (15%): Applied to the majority of goods, services, and imports. This is the only rate that allows businesses to claim Input Tax Credits (ITC).
Reduced Rates: Depending on the category, reduced rates of 5%, 7.5%, or 10% may apply. Note that businesses paying reduced rates generally cannot claim input tax rebates.
Specific VAT: Some products (like bricks or newsprint) have a fixed amount of tax per unit.
Zero-Rated (0%): Exports of goods and services are zero-rated, allowing exporters to claim refunds on the VAT paid for raw materials.
Exemptions: Essential items such as unprocessed food, life-saving medicines, and public transport are exempt. Notably, the VAT exemption on Metro Rail services has been extended until June 30, 2026.
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2. Registration and Thresholds
Businesses must identify whether they need to register for VAT or Enlist for Turnover Tax based on their annual turnover.
| Category | Turnover Threshold (Annual) | Tax Type | |
| Exempt | Below BDT 5,000,000 (50 Lakh) | No VAT/Turnover Tax | |
| Turnover Tax | BDT 5,000,000 to 30,000,000 | 4% Turnover Tax | |
| VAT Registration | Above BDT 30,000,000 (3 Crore) | 15% (or reduced rates) |
Note: Registration is mandatory regardless of turnover for certain sectors, including importers, exporters, and specific service providers (e.g., hotels, restaurants, telecom, and consulting firms.
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3. Compliance and Documentation
Under the e-VAT system, businesses must maintain specific "Mushak" forms to ensure transparency:
Mushak-6.1: Purchase Account Book.
Mushak-6.2: Sales Account Book.
Mushak-6.3: The Tax Invoice (issued to customers at the time of supply).
Mushak-9.1: The Monthly VAT Return.
Filing the Return
The VAT return must be filed by the 15th day of the following month. Failure to file on time attracts a penalty of BDT 10,000 and additional interest on the payable amount.
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4. Key 2026 Updates: Digital Transformation
The NBR has accelerated its push for a "Paperless VAT" environment.
e-VAT Digitization: A new "Hard Copy Return Entry" sub-module was introduced in early 2026. Businesses that previously submitted paper returns must digitize them through the portal by March 31, 2026, to avoid automatic penalties and facilitate seamless future online filings.
Advance Tax (AT) Changes: For 2025-26, the AT for raw material imports by manufacturers was reduced (often to 2%, while the rate for commercial importers remains higher (around 5-7%) to encourage local production.
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5. VAT Deduction at Source (VDS)
For 44 specified services, the buyer is required to deduct VAT at the time of payment and deposit it directly to the government. This is common in government contracts, large corporate purchases, and service sectors like construction and advertising.
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How to Stay Compliant
1. Obtain a BIN: Register through the [VAT Online Portal](https://vat.gov.bd) to get your 11-digit Business Identification Number.
2. Issue Mushak-6.3: Never sell a taxable product without a valid Mushak invoice.
3. Audit Preparedness: Keep all records (Mushak 6.1, 6.2, and 6.3) for at least 5 years.
In summary, VAT in Bangladesh remains the cornerstone of the country’s fiscal policy and internal revenue generation. As of 2026, the shift toward a fully digitized e-VAT system—including the mandatory migration of paper returns—highlights the government's commitment to transparency and compliance.
With the standard rate at 15% and strategic exemptions (like Metro Rail extended until June 2026), the framework balances revenue needs with public interest. For businesses, staying updated on VAT in Bangladesh is no longer optional but a digital necessity to ensure growth and avoid automated penalties.
Written by-
Rajan Kumer Debnath
Income Tax and VAT Adviser
Member: Dhaka Taxes Bar Association
Chamber 01:House # 05 ( 2nd Floor), Road # 06 Cell: 01727-546514 | Chamber 02:1216, PressClub Road, Kharompattri Cell: 01727-546514 |
