The government’s recent move to increase Value Added Tax (VAT) on online sales commissions from 5 per cent to 15 per cent has raised serious concerns among stakeholders, who warn that the decision could further strain Bangladesh’s small and medium enterprises (SMEs), including entrepreneurs in the country’s ready-made garment (RMG) sector.
SMEs, which form the backbone of Bangladesh’s economy and play an increasingly important role in the RMG supply chain, are already grappling with a host of challenges ranging from rising production costs to limited access to finance. The VAT hike on online sales commissions threatens to add another layer of pressure, particularly on small businesses that rely heavily on digital platforms to reach customers.
According to the preliminary report of the Economic Census 2024 by the Bangladesh Bureau of Statistics (BBS), approximately 75 lakh out of 1.18 crore economic units reported facing various operational challenges. Among them, 86 per cent cited the unavailability of capital as the most pressing issue, followed by limited access to loans (34.41 per cent), infrastructural deficiencies (19 per cent), and increasing production costs (9.77 per cent).
Stakeholders argue that many SMEs, including those operating in garment subcontracting and value-added services for the RMG industry, are still in the process of developing capacities for mass production, marketing, and global competitiveness.
The SME Foundation, which works extensively with women entrepreneurs and small businesses across sectors, has called for reversing the VAT hike and urged the government to provide a direct budgetary allocation for SME development. Although the proposed national budget includes a Taka 125 crore allocation for women entrepreneurs and a Taka 1,000 crore loan fund targeting 10,000 CSME entrepreneurs, the foundation argues that more comprehensive support is needed.
