Bangladesh Trade and Tariff Commission (BTTC) has proposed sweeping rationalisation of value-added tax (VAT) and supplementary duties (SD) in the FY2026-27 budget to protect domestic industries and boost competitiveness.
The recommendations were sent to the National Board of Revenue (NBR), covering imports, local production and marketing of raw materials, intermediate goods and finished products across sectors including cosmetics, refrigerators, automobiles and electronics.
The BTTC identified colour cosmetics and derma skincare as “nascent industries” and proposed policy support under the National Tariff Policy 2023.
It suggested tariff protection on imported raw materials and separate harmonised system (HS) codes for VAT-registered firms authorised to import such inputs.
The commission also proposed exemptions on VAT and SD at the local manufacturing stage to improve competitiveness against imports.
It said the measures could expand the domestic market and support improvements in the tax-to-gross domestic product (GDP) ratio.
Industry insiders said while home care and toiletries have attracted investment, colour cosmetics and skincare remain underdeveloped and import dependent.
Local firm Remark HB has set up a modern production facility and started operations in 2023, which officials said informed the recommendations.
Market data showed rapid growth, with colour cosmetics rising from Tk8,500 crore in 2020 to Tk13,000 crore in 2023 and skincare increasing from Tk13,000 crore to Tk21,000 crore over the same period.
After consultations with Bangladesh Refrigerator Manufacturers Association, the BTTC recommended reducing VAT to 10 per cent at the production stage for refrigerators, air conditioners and freezers using locally made compressors.
It also proposed scrapping provisions of an existing statutory regulatory order (SRO) and easing conditions to encourage local manufacturing.
The BTTC said disparities in value addition, due to differences in parts manufacturing capacity, have created uneven competition within the domestic industry.
In the automobile sector, it proposed revising SRO No. 170, saying the current structure has not sufficiently incentivised local manufacturing.
The existing structure includes 5 per cent VAT at production, 7.5 per cent trade VAT at the dealer level and a 30 per cent local value addition requirement.
The BTTC suggested reconsidering the rates or aligning them with dealer-level taxation.
For the computer and spare parts sector, it proposed extending incentives until 2028 to support import substitution, job creation, foreign exchange savings and product diversification.
The recommendations were finalised after consultations with industry stakeholders and trade bodies, alongside meetings with NBR officials.
The proposals align with the Bangladesh Trade and Tariff Commission Act 1992 amended in 2020 and the National Tariff Policy 2023.
The BTTC said the measures aim to balance industry protection, investment, employment generation and revenue mobilisation.
