Bangladesh’s cosmetics manufacturers have sought value added tax (VAT) and supplementary duty exemptions at the production stage in the upcoming budget, saying the current tax and tariff structure is inflating costs, distorting competition, and holding back an emerging export-oriented industry.
The Association of Skin Care and Beauty Products Manufacturers and Exporters of Bangladesh (ASBMEB) made the demand to ensure fair market competition, support new industrial development, and keep personal care products affordable.
The issue lies in how duties are applied across the value chain, according to a press statement.
According to ASBMEB, local producers of colour cosmetics, dermo-skin care products, and packaging materials pay higher duties on key raw materials, while imported finished cosmetics are often assessed at lower tariff values by declaring lower values instead of actual purchase prices, making imports cheaper than locally produced goods.
ASBMEB proposed capping import duty on raw materials at 1 per cent and waiving all additional regulatory and supplementary duties above that level.
Their struggle is more visible in soap production.
Soap noodles, a primary input, carry 25 per cent customs duty and 3 per cent regulatory duty under the 2025–26 tariff schedule, increasing production costs and directly raising retail prices.
Multinational companies, however, import raw material such as RBD palm stearin and crude palm kernel oil at 10 per cent duty with no regulatory duty, allowing them to produce soap at significantly lower cost.
Local firms, importing soap noodles, face higher input costs than multinationals producing them domestically, limiting their ability to supply soap at affordable prices.
Multinational companies are also unwilling to sell their locally produced soap noodles to domestic firms, restricting access to lower-cost inputs, ASBMEB said.
“Quality cosmetics production has started in Bangladesh, reducing import dependence, saving foreign exchange, and creating employment,” said ASBMEB President Ashraful Ambia.
He added that new technology-driven and environmentally compliant factories are being set up, strengthening the economy, but additional VAT and supplementary duties are pushing local entrepreneurs out of competition with foreign products.
The association also pointed to tariff valuation distortions.
Imported cosmetics are cleared at lower tariff values instead of actual purchase prices, reducing landed costs below domestic production costs and preventing a level playing field.
ASBMEB called for aligning tariff values with international market prices and assessing duties based on gross weight instead of net weight to ensure fair and realistic valuation.
The stakes are rising as demand grows.
Women aged 20 to 39—around 2 crore 73 lakh—form a major consumer base, with about 70 per cent using cosmetic products.
Annual consumption is estimated at Tk15,000 crore for colour cosmetics and Tk25,000 crore for skincare products.
Research by LightCastle Partners and Allied Market Research shows the market, valued at $1.23 billion in 2020, could reach $2.12 billion by 2027, growing at 8.1 per cent annually.
Imports account for around Tk15,000 crore each year, while about Tk25,000 crore of the market is controlled by under-declared imports, smuggled goods, and counterfeit products.
Smuggling, counterfeit goods deepen market distortion
ASBMEB said a significant share of demand is being met through duty evasion and fake products, causing revenue losses and health risks.
Economist Professor Muhammad Mahboob Ali said low-quality imports are driving foreign exchange outflows and weakening domestic industry.
“The government should stop substandard imports and provide policy support to local producers to increase revenue and reduce illicit financial outflows,” he said.
Association of Skin Care and Beauty Products Manufacturers and Exporters of Bangladesh General Secretary Jamal Uddin said dishonest traders are either evading duties through false declarations or producing counterfeit goods locally, distorting competition and harming legitimate businesses.
He said higher duties on raw materials and lower duties on finished imports are discouraging domestic investment and preventing the industry from developing in line with its market potential.
He added that locally produced cosmetics are already being exported to markets including the Middle East, Sri Lanka, Thailand, and the Philippines.
Industry stakeholders said policy support, protection of existing investments, and a balanced duty structure are essential to expand production, attract local and foreign investment, reduce import dependence, save foreign exchange, and position the sector as a major export contributor.
