Finance Minister Muhith says uniform VAT rate will remain unchanged at 15%

Finance Minister Abul Maal Abdul Muhith in a dramatic reversal of his earlier stance has said the uniform VAT rate will remain unchanged at 15 percent.

Abdur Rahim Badal Chief Economics
Published : 27 May 2017, 01:15 PM
Updated : 27 May 2017, 04:58 PM

“We had a lot of discussion over the issue. We have decided to keep it at 15 percent in the next fiscal year,” Muhith told a group of reporters at his secretariat office in Dhaka on Saturday.

Muhith said he was in favour of reducing the rate a bit, but that would create problems in calculations.  

He signalled that he would take the VAT-exempted annual turnover limit beyond Tk 3 million.

"The new ceiling will be fixed in a day or two," he said.

After the exemption threshold, businesses, registering turnover of up to Tk 8 million a year, now pay 3 percent tax. In the new fiscal year, the threshold will be raised to Tk 12 million or above, and the tax rate will be reset at 4-5 percent, according to Muhith.

"It means we are providing special exemptions to small businesses.”

Muhith said 25,000 to 26,000 businesses out of 800,000 registered for VAT pay the value added tax now.

"We will double the number to 50,000 in the next fiscal year," he said.

The finance minister claimed prices should not rise under the current VAT structure.

"The businesses have raised the prices a bit for Ramadan. This has nothing to do with VAT.”

He also claimed prices did not rise after any budget he announced under the Awami League government.

He is scheduled to place the proposed budget for fiscal 2017-18 in parliament on June 1.


The government wanted to implement the Value Added Tax and Supplementary Duty Act of 2012 from July 1 last year but shelved the plan following intense protests by trade bodies.

The rates of package VAT were raised instead. The new law keeps the VAT rate flat at 15 percent, eliminating different slabs.

Since then, the finance minister has been saying the law will be implemented from July 1 this year.

But when the businesses threatened to demonstrate against the plan again, Muhith said a reduced but uniform tax rate would be finalised on Thursday or Friday.

He met Prime Minister Sheikh Hasina to discuss the new rate on Thursday.

Speaking to the reporters on Saturday, Muhith said it was 'another big achievement' for him to see the VAT law being implemented.

Asked about his failures, the minister remained silent for a moment and then said: “The district budget is one. I could not do this."

"The country will not gain true sustainable development without strengthening local government."

The upcoming budget is the 11th planned by Muhith. It is also his ninth consecutive budget as Awami League government's finance minister.  

He also admitted that the government lacked skills to implement the budget.

According to him, around Tk 3.2 trillion would be implemented out of Tk 3.4 trillion targeted in the current fiscal year.

The size of the upcoming budget will cross Tk 4 trillion, he said.

Muhith also said the ceiling of tax-free annual income would be raised slightly from Tk 250,000 now.

"But a permanent limit will be fixed this time so that we will not have to raise it every year."  

Only one of the corporate tax rates may get changed in the upcoming budget, while the others would remain the same.

Muhith once again mentioned that a banking commission would be formed in the budget to bring back order to the sector.