Fresh duty, tax burdens likely to weigh heavily on living standards

Experts warn of rising prices for everyday goods and services

For over a year, inflation has swept across Bangladesh, casting a shadow over both the food and non-food sectors.

At times, it has even breached the double-digit mark, sending ripples through the economy.

To make matters worse, amid this soaring inflation, the government has raised duties and taxes on more than 100 goods and services.

This includes vital essentials such as medicines, LPG, and mobile SIM cards, burdening the economy at every stage—from import to production to supply chain.

Experts are voicing strong disapproval of the interim government’s decision to raise duties and taxes, calling it a quick but short-sighted fix to boost revenue.

They argue that the measure has ignited frustration across both the public and businesses in the impacted sectors, raising concerns about its long-term economic consequences.

Some politicians have described the interim government's decision as "anti-people".

Tanvir Zilui, a private sector employee from Mohakhali, said: “The government is only focused on raising taxes, without concern for whether people’s incomes are rising.

“Inflation is already stubbornly staying in double digits, and with this VAT [value-added tax] hike, prices of goods will certainly rise.

“Where are we supposed to go? Our burden is only getting heavier."

Aftab Ahmed Sarkar, an employee of a private company in Banani, has called the government's decision “hasty”.

He told bdnews24.com, "The government wants to increase revenue, which is fine. However, this could have been done during the national budget.

“People have already been crushed under the weight of high prices, and now the VAT hike will push prices of more goods even higher."

Following the ousting of the Awami League government on Aug 5, 2024, the president dissolved the parliament.

As a result, the Muhammad Yunus-led government raised duties and taxes through ordinances.

On Thursday night, two ordinances titled "Value Added Tax and Supplementary Duty (Amendment) Ordinance 2025" and "The Excise and Salt (Amendment) Ordinance 2025" were issued.

Earlier, on Jan 1, the Advisory Council approved the National Board of Revenue's, or NBR, proposal to increase VAT and supplementary duties.

Immediately after the ordinances were issued, the NBR sent out instructions to implement the changes, making them effective right away.

Finance Advisor Salehuddin Ahmed claimed that the move would not impact the market for everyday goods.

The NBR echoed the stance in a press release, saying it would not affect inflation.

However, Zahid Hussain, a former lead economist at the World Bank's Dhaka office, disagreed on the matter.

"The prices of the goods on which taxes have been increased will certainly rise. In no reality does it make sense to say that there will be no impact,” he told bdnews24.com

“Claiming there will be no impact seems to deny reality."

The economist added that according to the Consumer Price Index, or CPI, the weight and price of these items are relatively low, so their effect on inflation may be minimal.

He said, "The prices of many goods have been increased, and most of these products, which were taxed at below 15 percent, have now been raised to a 15 percent rate.

“This means VAT rate unification, where all products will have the same VAT rate. This was a policy of the government.

Zahid continued, "There were several exemptions in place, but these are now being removed in order to boost revenue collection.

“So far, there has been no growth in revenue."

He does not find this timing suitable for raising duties and taxes.

Zahid said, "The timing is questionable. When inflation in non-food sectors is also nearly in double digits, one can question the logic of increasing VAT and taxes at such a time from a practical perspective.

“If the aim was unification, this could have been addressed in the upcoming budget."

As part of the $4.7 billion loan agreement with the International Monetary Fund, or IMF, the interim administration has been instructed to generate an additional Tk 120 billion in revenue for the 2024-25 fiscal year.

As a result, the government has taken the abrupt step of increasing duties and taxes midway through the fiscal year to meet the target.

NEW FINANCIAL BURDENS WILL WORSEN PUBLIC STRUGGLE

While essential items like rice, lentils, flour, and edible oils are not included in the list of products and services facing tax and duty hikes, most of the items affected are considered necessities in today's world.

Politicians warn that this will fuel non-food inflation, making life even more difficult for the public.

In December 2024, inflation in non-food sectors slightly decreased to 9.26 percent, compared to 9.39 percent in November.

Communist Party of Bangladesh, or CPB President Shah Alam and General Secretary Ruhin Hossain Prince have expressed their frustration with the government's decision.

In a joint statement, they said: "The government has decided to raise indirect taxes on everyday items such as biscuits, common eateries, mobile recharges, and essential goods like gas, which will make the lives of ordinary people unbearable.

"The decision, driven by high inflation and IMF pressure, will have a negative impact on vulnerable, low-income, and marginalised groups, creating an economic crisis in the country."

They further described these decisions as resembling those of a fascist government, which are aimed at draining the pockets of the people.

The statement called for an immediate reversal of the decision, the recovery of funds laundered abroad, the collection of defaulted loans, and the imposition of special taxes on the wealthy.

In a separate statement, Bazlur Rashid Firoz, the general secretary of the Bangladesher Samajtantrik Dal, or BaSaD, Central Committee, pointed out that high inflation had already made daily life unbearable.

"The interim government's decision, influenced by IMF advice, will have a severe impact on rural low-income earners and lower-middle-class people, further deepening the crisis in both the economy and everyday life," the statement read.

He criticised the government's move as "anti-people" and called for the immediate cancellation of the decision.

VAT RATES

VAT on kitchen towels, toilet tissue, napkin tissue, facial tissue, hand towels, sunglasses, non-AC hotels, sweet shops, institutional purchases, and the sale of products and services in showrooms or outlets selling own-branded garments has been increased to 15 percent, up from the previous rate of 7.5 percent.

Similarly, VAT on a variety of services including motor vehicle garages and workshops, dockyards, printing presses, film studios, cinema halls, film distributors, repair and servicing shops, automatic sawmills, sports event organisers, transport contractors, suppliers to board meetings, tailoring shops, building maintenance companies, and social and sports clubs has also been raised from 10 percent to 15 percent.

Supplementary duties on imported areca nuts have been increased from 30 to 45 percent, while pine nuts have risen from 20 to 30 percent.

Duties on fresh or dried betel nuts have also gone up to 45 percent.

Duties on a range of fruits, including mangoes, oranges, citrus fruits, grapes, lemons, papayas, watermelons, apples, and pears, have also been raised.

In addition, fruit juices, vegetable juices, tobacco, nuts, paints, polymers, varnishes, lacquers, soap and soap-based products, detergents, fruit drinks, artificial or flavoured drinks, and both carbonated and non-carbonated electrolyte drinks have seen an increase in supplementary duties, ranging between 5 percent and 15 percent.

The supplementary duty on bills from hotels or bars that provide alcoholic beverages has been raised from 20 percent to 30 percent.

Similarly, for restaurants that serve alcoholic beverages, the supplementary duty on bills has also been increased from 20 percent to 30 percent.

Duty on mobile SIM cards has been increased from 20 percent to 23 percent.

For the first time, a 10 percent supplementary duty has been imposed on internet services or ISPs.

VAT on potato flakes, corn, machine-made and handmade biscuits, pickles, chutneys, tomato paste, mango, pineapple, guava, and banana pulp, tamarind paste, unusable transformer oil, lubricating oil, LPG, bulk imported petroleum bitumen, laminated driving licenses from Bangladesh Road Transport Authority, or BRTA, hard rock, ferro-manganese, ferro-silico manganese, ferro silicon alloy, HR coil to CR coil, CR coil to GP sheet, GI wire, 5 kVA to 2,000 kVA electrical transformers, plastic and metal frames for glasses, reading glasses, and mattresses made from coconut husk has been increased from 5 percent to 15 percent.

In addition, VAT on restaurant services and invoicing companies has been raised from 5 percent to 15 percent.

VAT for local businesses has been increased from 5 percent to 7.5 percent, while for medicines, the local business VAT has been increased from 2.4 percent to 3 percent.

However, VAT on LPG for local businesses has been removed from 2 percent.

For cigarettes, both price and duties have been raised across all four levels.

The current year's budget also reflected similar increases.

Earlier, there was no precedent for raising both price and tax duties at four different levels.

The ordinance states that at the lower level, the price of a 10-stick cigarette pack has increased from Tk 50 to Tk 60, with the supplementary duty rising from 60 percent to 67 percent.

In addition, the price for medium-level cigarettes has risen from Tk 70 to 80, with the supplementary duty increased from 65.5 percent to 67 percent; for high-level cigarettes, the price has increased from Tk 120 to 140, and supplementary duty increased from 65.5 percent to 67 percent.

The price for ultra-high-level cigarettes has increased from Tk 160 to 185, and the supplementary duty increased from 65.5 percent to 67 percent.

Supplementary duties of 10 percent have been imposed on limestone and dolomite.

Previously, supplementary duties on cigarettes were kept lower at the lowest tier compared to the other three tiers, but for the first time, a uniform supplementary duty has been applied across all tiers.

Through these price and tax increases, the NBR aims to collect an additional Tk 40 bollion in revenue in the remaining period of the current fiscal year.

Businesses with annual transactions between Tk 3 to 5 million will now be required to pay turnover tax. Previously, businesses with transactions between Tk 5 to 30 million were liable for turnover tax.

According to the new provision, businesses with annual transactions exceeding Tk 5 million will need to pay VAT at a rate of 15 percent on the sale of goods and services.

Airline ticket prices may also increase.

According to the ordinance, a Tk 500 excise duty is required for domestic and South Asian Association for Regional Cooperation, or SAARC, country flights.

This has been raised to Tk 700 for domestic flights, and for SAARC countries, it has doubled from the current rate to Tk 1,000.

In addition, ticket prices for flights to Asian countries have increased from Tk 2,000 to 2,500, while ticket prices for European countries have risen from Tk 3,000 to 4,000.