Amid ongoing high inflation in the country, the government has raised the Value Added Tax (VAT) and supplementary duties on over a hundred products and services, including hotels, restaurants, telecommunication, internet, medicine, soft drinks, and cigarettes.
Two new ordinances were issued on Thursday, imposing these increases.
This unexpected mid-year increase in VAT and supplementary duties for the 2024-25 fiscal year will raise the costs of these products and services.
For instance, the rise in supplementary duties on mobile phone services will lead to higher costs for calls and internet usage.
Dining at restaurants, purchasing clothes, and various other expenses will also become costlier.
The ordinances issued are the VAT and Supplementary Duty (Amendment) Ordinance 2025 and the Excise and Salt (Amendment) Ordinance 2025.
Following their issuance, the VAT department of the National Board of Revenue (NBR) released related guidelines, making the changes effective immediately.
According to NBR sources, the VAT and supplementary duty increase is part of efforts to fulfill conditions set by the International Monetary Fund (IMF) and to rationalize taxes on certain goods and services.
This proposal was approved during a meeting of the interim government’s advisory council on January 1.
After obtaining approval from the Ministry of Law and the chief adviser and president, it was issued as an ordinance due to the absence of the National Parliament.
Supplementary duty increased at the supply level
Supplementary duty on bills at hotels or bars providing alcohol or similar beverages has been raised from 20% to 30%.
The same increase applies to restaurants that serve alcohol.
Goods with increased VAT
VAT has been increased on products such as potato flakes, corn, machine-made biscuits, handmade biscuits, pickles, chutneys, tomato paste or ketchup, mango, pineapple, guava and banana pulp, tamarind paste, transformer oil, lubricants, LP gas, imported bulk petroleum bitumen.
It also applies to laminated driving licenses from BRTA, hard rock, ferro-manganese, ferro-silico manganese, ferro-silicon alloys, CR coils from HR coils, GP sheets from CR coils, GI wires, electric transformers ranging from 5kVA to 2,000kVA, plastic and metal eyeglass frames, reading glasses, and mattresses made from coconut coir.
VAT on these items has been increased from 5% to 15%.
Similarly, VAT for restaurants and event management companies has been raised from 5% to 15%.
Items such as kitchen towels, toilet tissues, napkin tissues, facial tissues, hand towels, sunglasses, non-AC hotels, sweet shops, institutional purchases, and showrooms of branded apparel have seen VAT increased from 7.5% to 15%.
Additionally, VAT for services such as electric poles, motor vehicle garages and workshops, dockyards, printing houses, film studios, cinemas, film distribution, repair and servicing, automated sawmills, sports event organizers, transport contractors, suppliers for board meetings, tailoring shops, building maintenance companies, and social and sports clubs has increased from 10% to 15%.
VAT increase at the business level
At the local business level, VAT has been raised from 5% to 7.5%.
For pharmaceuticals, the local business VAT has been increased from 2.4% to 3%.
However, the 2% VAT on LP gas for local businesses has been eliminated.
Increased taxes on cigarettes
Prices and duties on cigarettes have been raised in four tiers.
The price for 10 sticks of lower-tier cigarettes has been increased from Tk50 to Tk60, with supplementary duty raised from 60% to 67%.
In the medium tier, prices have risen from Tk70 to Tk80, and supplementary duty from 65.5% to 67%.
The upper tier has seen prices increase from Tk120 to Tk140, with duty also raised to 67%.
Premium-tier cigarette prices have gone from Tk160 to Tk185, with the same duty increase.
Additionally, a 10% supplementary duty has been imposed on limestone and dolomite.
Increased taxes on businesses
Currently, businesses with an annual turnover between Tk50 lakh and Tk3 crore must pay turnover tax.
Under the new rules, businesses with a turnover of Tk30 lakh to Tk50 lakh will also be liable to pay turnover tax.
For turnovers exceeding Tk50 lakh, a 15% VAT will be applicable on the sale of goods and services.
For alcohol bills, the existing supplementary duty of 20% has been increased to 30%.
Supplementary duties have also been raised on various goods and services at the import, production, and service levels.
For instance, the supplementary duty on fruit juice at the import stage has been increased from 20% to 30%, on tobacco from 60% to 100%, and on betel nuts from 30% to 45%.
Increased taxes on air tickets
According to the NBR, excise duties on air tickets have remained unchanged for several years.
To rationalize these duties, amendments to the Excise and Salt Act-1944 have been proposed.
Excise duties for domestic routes have been raised from Tk500 to Tk700.
For flights to Saarc countries, duties have doubled to Tk1,000.
For Asian countries, duties have been increased from Tk2,000 to Tk2,500, and for European destinations, from Tk3,000 to Tk4,000.
This will likely result in higher air ticket prices.