Dhaka metro rail authorities have requested the National Board of Revenue (NBR) to extend the existing value-added tax (VAT) exemption on passenger services for another 10 years.
The tenure of the existing vat exemption is going to end on December 31 this year.
Dhaka Mass Transit Company Limited (DMTCL), the operator of the metro rail, recently sent a formal letter to the NBR requesting that the service remain VAT-free until December 31, 2035.
The operator argues that imposing VAT would increase travel costs and undermine efforts to promote the metro as an affordable mass-transit option.
But the NBR officials said that the existing tax expenditure policy does not permit the NBR to extend the exemption until that date.
Only Parliament can approve such an extension. If the government wishes, it may extend the exemption only until June 30 next year, they added.
Metro rail services began on December 29, 2022, and the government granted a temporary VAT exemption that expires on December 31, 2025. Once the exemption ends, a 15 percent VAT will automatically apply to passenger fares.
Md Azizur Rahman, NBR Member (VAT Policy), told the TIMES of Bangladesh, “NBR does not have the authority to grant tax waivers as per the current tax expenditure policy.”
“Only the interim government or the next elected government can make that decision,” he added.
He, however, said that the imposition of 15 percent VAT would raise travel costs significantly for commuters.
DMTCL managing director Faruq Ahmed said, “We sought the exemption to ensure commuters do not face additional financial pressure.”
Responding to complaints that metro fares exceed bus fares on the same route—despite earlier claims of alignment—he said, “Those fares were determined two years ago. If the government does not extend the VAT exemption, we will have to reassess our options.”
DMTCL officials fear that imposing VAT could make metro travel more expensive and potentially discourage users, particularly at a time when the service is gaining popularity.
The state-owned operator is concerned that higher fares may generate negative public sentiment.
Currently, war-wounded freedom fighters and children accompanied by guardians travel free, while people with disabilities receive 15 percent discounts. MRT and Rapid Pass users enjoy 10 percent reduced fares.
Authorities also highlighted the metro rail’s role in easing Dhaka’s chronic traffic congestion and saving valuable working hours.
They pointed out that in neighbouring India, metro systems have been operating for more than 25 years without VAT, as expansion projects are still ongoing.
Against this backdrop, DMTCL said an extension of VAT exemption until 2035 is crucial to keep the service affordable and sustain growing public reliance on metro transport.
