The interim government has suddenly increased the value-added tax (VAT). According to relevant sources, the VAT and supplementary duties were increased mainly due to pressure from the International Monetary Fund (IMF).
The government has increased VAT on many goods and services, including ready-made garments, air-conditioned restaurants, sweets, biscuits, pickles, coil and tissue paper, and non-AC hotels. This will reduce the purchasing power of the common people. Business and trade will face a new crisis.
Economists and businessmen have already started criticising the government's decision. They say that it would have been best if revenue collection could have been increased by increasing direct taxes.
People are already feeling uneasy over the high prices of several daily necessities, including rice. They fear that they will be further pressured by the tax increase. Inflation is still over 10 per cent. Overall, the anger of the common people is increasing.
They are saying, "Let the government decide how to run us. There is no logic in increasing prices by increasing taxes like this. If these are not increased, the market will remain stable."
The government is trying to revive the country's economy. In this situation, economists believe that the cost of additional taxes will be a big burden on consumers.
Sources said that in the second half of the current 2024-25 fiscal year, the government has increased the VAT and supplementary duty on more than a hundred goods and services. This may further increase the daily living costs of the common people. On Thursday night, the National Board of Revenue (NBR) issued two ordinances in this regard. The two ordinances are the VAT and Supplementary Duty (Amendment) Ordinance 2025 and The Excise and Salt (Amendment) Ordinance 2025.
As a result of this ordinance, the cost of various goods and services will increase. For example, the cost of talking and using the internet will increase due to the increase in supplementary duty on mobile phone services. Again, the price of clothing may also increase. The cost of restaurant food will also increase. Apart from this, sweets, medicines, LP gas, fruit juice, drinks, biscuits, spectacle frames, cigarettes and various other products will be added to the list of price increases.
Mustafizur Rahman, Former Executive Director of the Centre for Policy Dialogue (CPD), a non-governmental research organisation, believes that the increase in VAT and VAT supplementary duty will increase the cost of living for the people. He said that such taxes have been increased at a time when high inflation prevails in the country. Not only low-income and marginal income people; the middle class are also struggling due to the pressure of high inflation. Now the imposition of new duties and taxes will create additional pressure on this category of people.
Until now, supplementary duty was imposed at the rate of 20 per cent on the use of mobile phone SIM or RIM cards. This has now been increased to 23 per cent. As a result, the cost of talking on mobile phones and using the internet will also increase. VAT on bills of brand shops and ready-made clothing outlets has been increased from 7.5 per cent to 15 per cent. In addition, VAT on all types of restaurants has been increased from 5 per cent to 15 per cent.
The list of tax increases also includes tissues, cigarettes, nuts, mangoes, oranges, grapes, apples and pears, fruit juices, any type of fresh fruit, paints, detergents, dyes, liquor bills, potato flakes, plastic and metal frames of glasses, reading glasses, sunglasses, electrical transformers and the oil used in them, electricity poles, CR coils, GI wires, etc. Apart from this, travel tax has also been increased.
Grameenphone Chief Corporate Affairs Officer (CCAO) Tanvir Mohammad said, "The sudden imposition of 3 per cent supplementary duty on mobile services has surprised us. The economy is still in recovery, and inflation is also above 10 per cent - in such a situation, this additional cost will create further pressure on consumers. This is the second time in seven months that the supplementary duty (SD) has been increased. It was first increased by 5 per cent in June 2024, and now it has been increased by 3 per cent. That is, in just seven months, a 9.2 per cent supplementary duty has been imposed on consumers."
"This tax hike in the middle of the fiscal year is unprecedented," SM Nazer Hossain, vice president of consumer rights organisation Consumer Association of Bangladesh, said. "Although the government claims that it is not on essential goods, except for cigarettes, all the rest are related to people's daily lives. This will increase the cost of living and will provoke inflation. Ultimately, this will have a negative impact on people's lives."
He said, "People are already under the pressure of high inflation. Therefore, I think it is completely unreasonable to increase taxes in the middle of the fiscal year." Imran Hasan, secretary general of the Bangladesh Restaurant Owners Association, said that restaurant owners are worried about the decision to increase VAT. He said that if VAT is increased, it will have a terrible impact on business. Income tax will also increase along with VAT. This will harm small businessmen.
He alleged, "This is part of a nefarious attempt to destroy small hotels and restaurants and hand over this industry to corporations."
Taskin Ahmed, president of the Dhaka Chamber of Commerce and Industry, said that such a move by the government will increase the cost of production and operation of businesses, which will ultimately be reflected in the price of goods and accelerate inflation. He believes, "This decision will reduce the purchasing power of consumers. This may have a negative impact on the economy."
Former Customs Commissioner Abdul Kafi said, "VAT should be increased at a ratio or rate in the middle of the budget that is collectable and affordable for the people." He also said, "We know that there is inflation of about 13 per cent. And it has gone beyond the purchasing power of the people. I think VAT should not have been increased at such a high rate."
Ahsan Uddin Bhuiyan, a private service holder, told the Daily Observer, "The price of baby diapers, medicines and other essential commodities have increased significantly due to the increase in VAT. The prices of all products are already very high. Now, with the new VAT increase, the middle people and lower middle people suffer even more."
