The upcoming FY2026-27 budget is set to make electric vehicles (EVs) more affordable while significantly increasing the tax burden on mid-range fossil fuel-powered cars, marking one of the government’s strongest policy shifts towards cleaner transportation and renewable energy.
An analysis of the draft budget speech and Finance Bill 2026 obtained by TIMES, together with the official budget summary, suggests that the overall tax incidence on imported internal combustion (IC) engine vehicles with engine capacities of 1,200cc to 1,600cc will rise from 132.36 per cent to 155.88 per cent.
The move aims to discourage the import and use of diesel, octane and petrol-powered vehicles while encouraging consumers to shift to environmentally friendly alternatives.
If implemented, the higher tax could substantially raise vehicle prices. A car with an import value of Tk30 lakh currently carries a total tax incidence of 132.36 per cent, bringing its market cost to around Tk69.71 lakh.
Finance Minister Amir Khosru Mahmud Chowdhury is set to place the Tk9.38 lakh crore national budget for FY2026-27 on Thursday.
Under the proposed structure, the same vehicle would cost approximately Tk76.76 lakh, an increase of Tk7.05 lakh solely due to higher taxes. The increase applies only to imported fossil fuel-powered vehicles in the 1,200cc–1,600cc category; existing tax structures for other imported vehicles remain unchanged.
The budget also proposes incentives to accelerate electric mobility and reduce dependence on imported fossil fuels.
Import duties on completely built-up EVs will be reduced via a tiered system: EVs priced up to $25,000 will face an effective duty of 64 per cent, while those valued up to $50,000 will be taxed at 80 per cent, down from the current 93 per cent. Regulatory duty on hybrid vehicles with engines up to 1,800cc will be withdrawn, making fuel-efficient vehicles more accessible.
Further, imports of EV charging stations, electric buses and trucks will enjoy full exemption from source tax, supporting infrastructure development and encouraging private investment.
EV registration and renewal taxes under the Bangladesh Road Transport Authority (BRTA) will be revised from a flat Tk2 lakh advance income tax (AIT) to a capacity-based slab: up to 200kW Tk25,000; up to 300kW Tk50,000; up to 400kW Tk75,000; above 400kW Tk1 lakh.
The clean energy push extends beyond transport. The budget proposes extending the zero percent tax regime for the solar sector until 2035 and introducing a 5 per cent rebate on electricity bills for solar users.
Officials said the combined measures aim to accelerate Bangladesh’s transition to clean energy, lower emissions, reduce fossil fuel dependence and create a predictable investment environment for green technologies.
The proposals signal a clear policy direction: making conventional fossil fuel-powered vehicles more expensive while lowering the cost of adopting electric and renewable energy technologies.
BARVIDA President Abdul Haque said the proposed increase in import duty on 1200cc–1600cc vehicles would have a “very, very bad” impact on the market.
He noted that the current total tax incidence of 132 per cent is already significantly higher compared to Completely Knocked Down (CKD) units, which face around 48 per cent duty, creating a wide disparity in the market.
He warned that this imbalance would seriously affect the reconditioned vehicle import sector. According to him, such a sharp increase would further push up vehicle prices, particularly for cars imported from Japan, making them considerably more expensive for consumers.
