Written by Md Rakib Hassan — Income Tax Practitioner with 10+ years of tax compliance and audit experience across Bangladesh and the UK. Former Accounts Manager at a UK chartered accounting firm managing 1,000+ clients, with direct experience resolving multi-year tax audit disputes with HMRC and the NBR. Currently Finance Controller at a UK-based multinational tech group.
If you are running a business, managing accounts, processing vendor payments, or simply trying to understand what you are being charged at the shop counter, knowing the VAT rate in Bangladesh is non-negotiable. VAT is the single largest source of indirect tax revenue for the government, and it touches virtually every stage of the supply chain — from import to manufacturing, wholesale, retail, and final consumption.
This guide covers the current VAT rate in Bangladesh for the financial year 2025–26 — including the standard rate, every major reduced rate, sector-by-sector breakdowns, the VAT rate chart, registration thresholds, VAT Deduction at Source (VDS) obligations, and the key changes introduced by the Finance Ordinance 2025. Every figure here is sourced from the NBR and the VAT and Supplementary Duty Act 2012, as updated by the Finance Ordinance 2025.
The Legal Framework Behind the VAT Rate in Bangladesh
VAT was introduced in Bangladesh in 1991, making it one of the earliest adopters of consumption tax in South Asia. The current governing legislation is the VAT and Supplementary Duty (SD) Act 2012, which came into full effect in 2019, replacing the earlier VAT Act of 1991.
The law is administered operationally by the National Board of Revenue (NBR). However, a significant structural change has come through the Revenue Policy and Revenue Management Ordinance 2025, which dissolved the NBR and the Internal Resources Division (IRD), replacing them with two separate bodies: the Revenue Policy Division (RPD) for policy and legislation, and the Revenue Management Division (RMD) for administration, collection, and enforcement.
One important compliance implication of this change: under the Finance Ordinance 2025, the government — not the NBR — now has sole authority to issue VAT exemptions for general categories of goods and services. The NBR can no longer issue blanket exemption orders. This tightens the exemption framework significantly and means businesses can no longer rely on informal or NBR-level exemption assurances.
What Is the Standard VAT Rate in Bangladesh?
The standard VAT rate in Bangladesh is 15%. This rate applies to:
- Most imports into Bangladesh
- Most domestic supplies of goods
- Most services rendered within Bangladesh
VAT is levied at the rate of 15% on all imports and supplies, except on goods and services waived under the provisions of the First Schedule of the VAT & SD Act 2012.
This is a broad base. If you are buying goods from a supplier, importing raw materials, or paying for a professional service, the bd vat rate of 15% is almost certainly the starting point. Whether a reduced rate or exemption applies is a question of checking the Third Schedule of the Act and any applicable SRO issued by the NBR.
How VAT Works in Practice — The Input Tax Credit System
Bangladesh uses a credit-offset VAT mechanism, which means you only pay VAT on the value you add at each stage — not on the total price.
If a taxpayer purchases goods for BDT 1,000 and sells them for BDT 1,500, the VAT included in the purchase price is BDT 130.43 (calculated as 1,000 × 15/115). The VAT included in the selling price is BDT 195.65 (calculated as 1,500 × 15/115). The net VAT payable is only BDT 65.22 — the difference — which reflects only the value added at the selling stage.
The seller collects the full VAT from the buyer, deducts the VAT already paid on inputs (input tax credit), and remits only the net difference to the government treasury.
This input tax credit mechanism is the engine of the VAT system. Getting it wrong — either by claiming credits you are not entitled to, or failing to offset credits you have — is one of the most common sources of VAT disputes with the revenue authority.
VAT Rate Chart in Bangladesh — Reduced Rates by Sector (FY 2025–26)
The vat rate chart in Bangladesh is not a single-number document. The Third Schedule of the VAT & SD Act 2012 lists goods and services at rates below the standard 15%, organised by HS Codes and service categories. Below is a practical summary of the most commonly encountered reduced rates for FY 2025–26.
Goods — Reduced VAT Rates at the Local Trading Stage
The rate of VAT shall be 5% in the case of supply of all goods at the local trading stage. However, the rate is 2.4% for medicines at the local trading stage, and 2% for diesel, kerosene, octane, petrol, furnace oil, and LP gas at the local trading stage.
Wholesale businesses pay VAT at 1.5%, subject to compliance with prescribed conditions and procedures.
| Category | VAT Rate |
|---|---|
| Local trading stage (general goods) | 5% |
| Medicines (local trading stage) | 2.4% |
| Petrol, diesel, kerosene, LPG, furnace oil (local trading) | 2% |
| Wholesale business | 1.5% |
| Import stage (all goods, general) | 15% |
Real Estate and Construction
The VAT rate for land developers is 3%. For real estate organisations engaged in building sales and transfers, the rate is 2% for units of 1 to 1,600 square feet, 4.5% for units of 1,601 square feet and above, and 2% for re-registration of any size.
| Property Type | VAT Rate |
|---|---|
| Land developer | 3% |
| Apartment/building sale — up to 1,600 sq ft | 2% |
| Apartment/building sale — 1,601 sq ft and above | 4.5% |
| Re-registration (any size) | 2% |
Industry-Specific Reduced VAT Rates
The pharmaceutical industry enjoys a reduced VAT rate of 5%. The rate for the jute industry is 4%, while for the textile and garment sector, it is 7.5%.
| Industry | VAT Rate |
|---|---|
| Pharmaceutical / medicines | 5% |
| Textile and garment | 7.5% |
| Jute | 4% |
| Refrigerators and freezers (updated FY 2025–26) | 7.5% |
Important update: The VAT on refrigerators and freezers was increased from 5% to 7.5% under the Finance Ordinance 2025. If you are in the consumer electronics or appliance trade, this is a direct cost-price impact you need to factor in.
Services — VAT Rates by Service Category
The vat rate in bangladesh on services varies considerably by service type. Below are some of the most commonly encountered service categories from the Third Schedule:
| Service Category | VAT Rate |
|---|---|
| Standard services (general) | 15% |
| Hotel/restaurant (with wine or floor show) | 20% |
| Mobile phone services (SIM/RIM) | 15% |
| Satellite channel distributors | 25% |
| Credit rating agencies | 7.5% |
| Online product sales | 5% |
| Cultural events with foreign artists | 10% |
| Construction/engineering works | Varies (7.5–15%) |
Note on mobile and internet: The Supplementary Duty on services via mobile phones and internet modems has been increased under the Finance Ordinance 2025. Your monthly mobile bill now carries a higher effective tax burden at the supplementary duty level.
Zero-Rated VAT — Exports and Special Categories
Exports from Bangladesh are subject to zero-rated VAT — meaning the VAT rate is technically 0%, but the supplier remains entitled to claim input tax credits on goods and services used in producing the exported items. This is a significant commercial advantage for export-oriented businesses and is central to Bangladesh’s garment and textile sector.
Zero-rated treatment generally applies to:
- Direct exports of goods
- Export processing zone (EPZ) supplies
- Certain services provided to non-residents in foreign currency
Zero-rated is fundamentally different from VAT-exempt. Under a zero rate, the supplier can recover input VAT. Under an exemption, they cannot — meaning the irrecoverable input VAT becomes an embedded business cost.
VAT-Exempt Goods and Services
The First Schedule of the VAT & SD Act 2012 lists goods and services that are entirely exempt from VAT at all stages. Common examples include:
- Basic food items (rice, wheat, salt, unprocessed fish)
- Agricultural produce and seeds
- Books and educational materials
- Medical and healthcare services (in many cases)
- Certain public utility services
VAT-exempted goods and services are mentioned in the 1st Schedule of the VAT & SD Act 2012. Additionally, the NBR issues separate SROs each year to grant VAT exemptions for specific goods or services. However, as noted earlier, following the Finance Ordinance 2025, the government now holds sole authority to issue new general VAT exemptions — so SRO-based exemptions may become less frequent.
One practically important recent exemption: VAT on the import of polypropylene staple fibre has been fully exempted to support local industries.
VAT Registration in Bangladesh — Who Must Register?
In Bangladesh, it is mandatory for businesses to register for VAT and pay 15% VAT if their annual turnover exceeds BDT 8 million (BDT 80 lakh). For businesses with annual turnover between BDT 3 million (BDT 30 lakh) and BDT 8 million (BDT 80 lakh), a turnover tax of 3% applies instead of the full 15% VAT. Businesses below BDT 30 lakh do not generally need VAT registration.
| Annual Turnover | VAT Obligation |
|---|---|
| Below BDT 30 lakh | Generally no registration required |
| BDT 30 lakh – BDT 80 lakh | 3% Turnover Tax |
| Above BDT 80 lakh | Standard 15% VAT registration mandatory |
| Importers/exporters | Must register regardless of turnover |
Businesses dealing with imports or exports must register for VAT. E-commerce platforms, manufacturing companies, telecom companies, banks, and other large service providers are also required to register. After registration, you receive a BIN (Business Identification Number), which is used for filing VAT returns and issuing VAT invoices.
Voluntary registration is also permitted for businesses below the threshold — which can be commercially advantageous if your clients are VAT-registered entities requiring proper VAT invoices.
Practitioner’s note: In my experience working with clients across Bangladesh, turnover-based VAT thresholds are regularly misunderstood. Many businesses operating in the BDT 30–80 lakh band assume they are fully exempt and neither register nor pay the 3% turnover tax. This creates accumulated liability and penalty exposure. If you are near either threshold, get professional advice before assuming you are outside the net.
NBR VAT Rate — VAT Deduction at Source (VDS) in Bangladesh
VDS — VAT Deduction at Source — is one of the most operationally demanding aspects of the nbr vat rate framework. It requires certain entities (called “withholding entities”) to deduct VAT at the point of payment to suppliers, rather than the supplier collecting it and remitting separately.
Who Are Withholding Entities?
Banks, insurance companies, other financial institutions, educational institutions above the secondary level, and any entity or organisation with an annual turnover exceeding BDT 10 crore are responsible for deducting VAT at the applicable rate from vendor payments.
Government bodies, autonomous organisations, and NGOs are also covered.
Legal Basis for VDS (FY 2025–26)
The legal foundation for VDS in 2025–26 is SRO No. 182-Law/2025/310-VAT, dated 27 May 2025, issued by the NBR. This SRO provides the detailed guidelines on VDS rates, as well as the circumstances under which VAT must be deducted.
When Is VDS Not Required?
No VAT deduction at source is required for the supply of goods and services mentioned in the First Schedule of the VAT & SD Act 2012. Zero-rated supplies are also exempt from VDS. VAT deduction at source is not required when purchasing locally manufactured medicines from a trader under the VDS Rules 2025.
VAT deduction is not applicable for utility services — specifically fuel, gas, water (WASA), electricity, and mobile bills — as per the VDS Rules.
Which Services Require Mandatory VDS?
For services, VDS is mandatory for 44 specified services under the VDS Rules 2025. For goods, if a manufacturer supplies a product using a VAT 6.3 invoice (Mushak 6.3), no VDS deduction is required at source.
The distinction between goods purchased directly from a manufacturer (with Mushak 6.3) and goods purchased through an intermediary is critical — and a very common area of compliance error in practice.
Extended Input Tax Credit Window
An important operational change from the Finance Ordinance 2025: previously, input tax credit was required to be claimed in the tax period of purchase and within the next four tax periods. The window has now been extended — input tax credit must now be claimed in the tax period of purchase and within the next six tax periods. This gives businesses more flexibility to reconcile input credits, particularly where invoices or customs documentation arrive late.
Supplementary Duty (SD) — What It Adds on Top
The vat rate bangladesh conversation is incomplete without understanding Supplementary Duty. SD is an additional levy applied on top of VAT on selected goods and services considered luxury items, harmful to health, or environmentally damaging. It is applied at the import or manufacturing stage.
Key SD increases from Finance Ordinance 2025:
- Supplementary Duty on services via mobile phones and internet modems has been increased.
- SD on construction rods has increased.
- Paper products, tissues, and some home appliances have also seen SD increases.
SD stacks on top of VAT and customs duties — meaning the effective landed cost of affected goods can rise significantly. For importers and manufacturers of consumer goods, the Finance Ordinance 2025 SD changes deserve careful cost modelling.
VAT on Imports — The Full Cost Stack
When goods are imported into Bangladesh, the VAT rate in Bangladesh at the import stage is the standard 15%, applied on the assessable value (which includes the CIF value plus customs duty). However, the total import tax burden can include:
- Customs Duty (CD)
- Supplementary Duty (SD)
- Value Added Tax (VAT) at 15%
- Advance Tax (AT) — a pre-payment against future income tax liability
In the case of commercial importers, the rate of Advance Tax at the import stage has been increased under the Finance Ordinance 2025.
The effective import cost stack can therefore be substantially higher than the headline 15% VAT rate alone, particularly for sectors with applicable SD.
VAT Return Filing — Compliance Calendar
VAT returns in Bangladesh are filed monthly using Mushak 9.1 (the VAT return form). The filing deadline is the 15th of the following month for most taxpayers.
However, under the Finance Ordinance 2025, there is an important sector-specific change: the tax period for construction companies, procurement providers, and clearing & forwarding agents is now semiannual, ending on 30 June and 31 December. This provision does not apply if those entities are VAT withholding entities.
Key compliance records required:
- Mushak 6.1 — Purchase register
- Mushak 6.2 — Sales register (or Mushak 6.2.1 — combined register)
- Mushak 6.3 — VAT invoice issued to customers
- Mushak 9.1 — Monthly VAT return
Company ERP systems can now be used for maintaining VAT books and records — including purchase registers (Mushak 6.1), sales registers (Mushak 6.2), and combined purchase and sales registers (Mushak 6.2.1). Importantly, NBR permission is no longer required to use ERP software for these purposes — a welcome change that reduces administrative friction for larger businesses.
Penalties for VAT Non-Compliance
The VAT & SD Act 2012 contains robust penalty provisions. Failure to deduct VDS where required, failure to file returns on time, issuing false VAT invoices, or claiming inadmissible input tax credits can all attract financial penalties and, in serious cases, prosecution.
In practice, the most common penalty triggers I see are:
- Failure to deduct VDS on one of the 44 specified services
- Claiming input tax credit outside the permitted time window
- Failing to register when turnover crosses BDT 80 lakh
- Using cash transactions above BDT 1 lakh without proper documentation (value above BDT 1 lakh must be settled through banking channels to form part of a valid VAT transaction)
VAT Rate in Bangladesh — At a Glance Summary
| VAT Type | Rate |
|---|---|
| Standard VAT rate (general goods & services) | 15% |
| Import VAT (general) | 15% |
| Local trading stage (general goods) | 5% |
| Wholesale business | 1.5% |
| Medicines (local trading) | 2.4% |
| Petroleum products (local trading) | 2% |
| Pharmaceutical manufacturing | 5% |
| Textile and garment | 7.5% |
| Refrigerators and freezers (updated 2025–26) | 7.5% |
| Jute industry | 4% |
| Land developers | 3% |
| Real estate — up to 1,600 sq ft | 2% |
| Real estate — 1,601 sq ft and above | 4.5% |
| Hotel/restaurant (with wine or floor show) | 20% |
| Satellite channel distributors | 25% |
| Online product sales | 5% |
| Zero-rated (exports) | 0% |
| Turnover tax (BDT 30–80 lakh turnover) | 3% |
Final Word from the Author
In over a decade of tax work across Bangladesh and the UK, I have seen VAT compliance cause more operational disruption than income tax in many organisations — precisely because it occurs at every payment, every purchase order, and every sales invoice, not just once a year at return time.
The current VAT rate in Bangladesh of 15% is straightforward in theory. In practice, the reduced rates, VDS obligations, SD implications, and the Finance Ordinance 2025 changes create a compliance environment that demands active monitoring. The NBR audit machinery — now under the Revenue Management Division — is becoming increasingly data-driven, and mismatches in input/output VAT or failure to deduct VDS on specified services are areas of growing audit focus.
If you are responsible for VAT compliance in any organisation — large or small — the single best investment you can make is ensuring your team understands which rate applies to which transaction, and that your accounting system is configured to enforce those rates consistently.
For the official VAT rate chart in Bangladesh, always refer to the Third Schedule of the VAT & SD Act 2012 and the latest SROs published on nbr.gov.bd. For VDS obligations specifically, refer to SRO No. 182-Law/2025/310-VAT, dated 27 May 2025.
© Md Rakib Hassan. This article is for informational purposes only and does not constitute legal or VAT advice. Seek professional guidance for your specific compliance situation.
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