The Bangladesh Government has amended the Value Added Tax (VAT) Law 2012, reclaiming the authority to issue extraordinary orders exempting individuals from the indirect tax, according to an ordinance issued by the Law Ministry.
This comes months after the Government eliminated the National Board of Revenue’s (NBR) authority to award exemptions from advance tax, supplementary duty (SD) and VAT in the Tax Expenditure Policy and Management Framework (TEPMF). In July of this year, the policy went into force.
According to officials, welfare organisations and contributions frequently apply to the NBR for tax exemptions. The revenue board is no longer able to provide such benefits since the new policy has come into effect.
In order to address this, the NBR included a provision stating that VAT exemptions on grants and donations would not be subject to the tax expenditure policy.
According to a senior NBR official who spoke on condition of anonymity, “So, the provision of special orders has been included, empowering the Government to give the exemption.”
The Government has also increased the advance tax on revenue from investments in treasury bills and bonds owned by corporations in the ordinance on a few finance-related laws (second amendment) 2025.
In the past, businesses had to pay 10% tax on interest received from these instruments. With the change, this has now been increased to 15%.
“The overall tax on companies from income on financial assets had not increased despite the higher advance tax on securities,” stated Snehasish Barua, Managing Director of SMAC Advisory Services. Till now, firms paid these taxes at the time of filing income tax returns. However, he added that it seems the Government needs fast revenue to finance the budget and so it is collecting tax on income from such types of financial assets directly.
As per Article 4 of the Tax Expenditure Policy, effective from July of this year, Snehasish said that only parliament will have the authority to approve tax exemptions except in certain cases.
The Government may, however, provide VAT exemptions through special orders in accordance with Section 126 of the VAT and Supplementary Duty Act 2012, in accordance with the policy, he added, under the second amendment to the Finance Ordinance 2025.
The policy’s Article 4 proviso states that the Government may have to exempt some goods and services from taxes. It may take longer to process these adjustments through the official gazette than it would to issue a special order.
Because tax expenditure is a contributing element to the low tax-to-GDP ratio in the nation, Snehasish stated that great prudence must be used when awarding such exemptions.
