Bangladesh Steel Manufacturers’ Association (BSMA) has proposed sweeping tax cuts in the FY2026–27 budget, warning high levies are inflating production costs, squeezing liquidity, and pushing up construction material prices.
The industry body, in its proposal to the National Board of Revenue (NBR), said on Monday that rising costs are eroding competitiveness in domestic and export markets, calling for reforms across VAT, income tax, customs duties, import taxes, and procedures.
At the production stage, BSMA proposed cutting VAT on billet and ingot from Tk1,500 to Tk800 and on MS products from Tk1,600 to Tk800.
It also sought reducing VAT on scrap-based steel from Tk2,700 to Tk1,600.
On inputs, it proposed lowering VAT on ferrous scrap import and handling from Tk1,800 per tonne to Tk500 and cutting advance income tax to Tk500, saying upfront taxes strain liquidity before production begins.
It suggested keeping VAT on iron rod trading unchanged at Tk200 to stabilise prices.
The association urged easing export rules by allowing documentation beyond letters of credit, including contracts and agreements, and expanding coverage to bilateral government deals.
It also proposed recognising deemed exports where suppliers receive foreign currency through banks.
BSMA called for scrapping withholding VAT at source when valid invoices are issued, introducing risk-based audits, and simplifying Mushak 4.3 declarations with quantity-based reporting and VAT on actual values.
It also sought incentives for carbon-neutral production, recycling, and green technology.
On income tax, it proposed keeping advance income tax at 0.5 per cent on billet and scrap, cutting tax deducted at source on iron rod sales to 1 per cent, and reducing import-stage advance tax on scrap and sponge iron to Tk500.
It also suggested lowering turnover tax to 0.5 per cent and simplifying minimum tax through a unified formula based on source tax, taxable income, or 0.5 per cent of gross receipts.
The association called for recognising digital records, including enterprise resource planning data and e-invoices, for audit, excluding unrealised income from subsidiaries in tax calculations, and allowing unpaid accrued interest as deductible costs.
It also sought removing withholding tax on resident interest outside banks and scrapping tax on foreign loan interest to reduce financing costs, alongside a uniform 2 per cent withholding tax on iron products and cement and clearer transport tax rules.
Other proposals include automated tax refunds with interest, raising the tax-free income threshold to Tk7 lakh, and clearer incentives for renewable energy, especially solar OPEX models.
On imports, BSMA proposed restructuring duties on 29 categories of raw materials and machinery, including ferrous scrap, ferro alloys, pig iron, quartz, graphite powder, and mould powder, with sharp cuts in VAT and advance taxes.
It also sought reducing VAT and advance tax on scrap to Tk500 and scrapping the 15 per cent regulatory duty on ferro alloys.
While seeking lower input taxes, the association proposed maintaining tariffs on finished steel such as billets, bars, and rods to protect domestic producers, citing sufficient local capacity and the need to safeguard investment and jobs.
It also called for major duty cuts on industrial machinery, including transformers, cables, relays, static converters, and industrial software, in some cases reducing duties from 25 per cent to 1 to 5 per cent with VAT and advance tax exemptions.
Further proposals include lower duties on capital machinery such as cranes and couplers, retaining 1 per cent duty on crane parts, and near-zero duty on insulators and static converters due to import dependence and their importance for production continuity.
Bangladesh’s steel industry expanded significantly during the economic growth phase over the last decade.
However, in a slowed-down market, the industry has been struggling to ensure sufficient utilisation of capacity over the past three years.
