On 11 June 2020, Mr. AHM Mustafa Kamal, the Finance Minister of Bangladesh has presented the national budget of Tk. 568,000 crore with an ambitious target of 8.2 percent GDP growth for the FY 2020-21 in Parliament.

The revenue collection target has been set Tk. 378,000 crore for the next fiscal year. The NBR has been tasked to collect revenue of Tk. 330,000 crore, the non-NBR revenue collection target is Tk. 15,000 crore while the non-tax revenue collection target is Tk. 33,000 crore and Tk. 4,013 crore will come from foreign grants.

Individual Tax

Finance Minister proposed to increase the tax-free income threshold of male taxpayers from Tk. 2 lakh 50 thousand to Tk. 3 lakh and the tax-free income threshold of female taxpayers and taxpayers above 65 years of age from Tk. 3 lakh to Tk. 3 lakh and 50 thousand respectively. Accordingly, he proposed to reduce the minimum tax rate for individuals from 10 percent to 5 percent, and the maximum tax rate for individuals from 30 percent to 25 percent. The following table presents the proposed tax-free income threshold, tax rates and tax slabs for all categories of individual taxpayers except companies and local authorities:

Total IncomeTax rate
On first Tk. 3,00,000Nil
On next Tk. 1,00,0005%
On next Tk. 3,00,00010%
On next Tk. 4,00,00015%
On next Tk. 5,00,00020%
On the balance of total income25%

To popularize the option of online payment of taxes and online submission of tax return among the taxpayers, he proposed a tax rebate of Tk. 2000 to all the taxpayers who will file their income tax returns online for the first time.

Corporate Tax

Except for banks, leasing and insurance companies, mobile phone companies and cigarette manufacturers, tax rates for publicly traded companies and non-publicly traded companies have remained 25 percent and 35 percent respectively since FY 2014-15. To ease the tax burden at this critical time of the COVID-19 pandemic, Mr. Kamal proposed a 2.5 percent reduction in the tax rate of non-publicly traded companies to fix it at 32.5% from that of 35%.

At present, the RMG factories having green building certification enjoy a special tax rate of 10 percent, whereas RMG factories without such certification pay taxes at a rate of 12 percent. The deadline of the SRO providing this special tax rate ends on 30th June 2020, now it has been proposed to extend the time-limit of the said SRO by another two years.

Withholding Tax

Finance Minister proposed to bring down the rate of tax deduction at source (TDS) at the stage of local supply of essential commodities, such as Rice, Wheat flour, Potato, Garlic, Onion, etc. from 5 percent to 2 percent irrespective of the base price. The prevailing highest rate of tax deducted at source on supply of locally sourced M.S. scrap stands at 5 percent. Considering the financial capability of small businesses dealing in local supply of M.S. scrap as well as the issue of promoting the steel manufacturing industry, he proposed to fix the rate of locally sourced M.S. scrap supply, irrespective of its base price, at 0.5 percent. He also proposed to reduce TDS rate to 2 percent (currently 5%) on the import of Garlic, Sugar, and raw material of poultry feed. He suggested amending the Ordinance to fix the rate of withholding tax on all sorts of export proceeds including RMG at 0.5 percent instead of the existing rate of 1 percent.

Tobacco Tax

To reduce the consumption of tobacco products and maximize revenue collection, there are several following proposals for this sector:

  • Price Per 10-sticks lower slab cigarette to become Tk. 39 and above and supplementary duty on it to be 57 percent; the price per 10-sticks middle slab cigarette at Tk. 63 and above, that of high slab 10-sticks cigarette at Tk. 97 and above and the price of premium slab 10-sticks cigarette at Tk. 128 and above where supplementary duty will be 65 percent for all those three slabs;
  • Raising the price of handmade non-filter 25-sticks Bidi at Tk. 18 from existing Tk. 14, that of 12-sticks at Tk. 9 from existing Tk. 6.72 and the price of 8-sticks at Tk. 6 from existing Tk. 4.48 where supplementary duty of this product will be unchanged at 30 percent. Fixing the price of 20-sticks filter bidi at Tk. 19 from existing 17 and that of 10-sticks filter bidi at Tk. 10 from existing Tk. 8.50 where supplementary duty will remain unchanged at 40 percent; and
  • Fixing the price of 10 gm of Jarda at Tk. 40 and the price of 10 gm of Gul at Tk. 20. Supplementary duty of both the products is proposed to become 55%.

Value Added Tax (VAT)

Value Added Tax (VAT) is the largest contributor to the NBR tax revenue. Proposed VAT measures are following:

  • Reducing Advance Tax (AT) on imported raw materials for manufacturing industries from existing 5 percent to 4 percent;
  • Time limit for input tax credit extend up to 4 tax periods from existing 2 tax periods;
  • Considering 80 percent of the expenditure incurred on transportation services as input credit;
  • Considering the next working day as the deadline for return submission if the 15th day becomes a public holiday;
  • Deposit amount increases from 10 percent to 20 percent of disputed tax while filing appeal before the Appellate Tribunal;
  • VAT exemption on the manufacturing of mobile phone sets and 5 percent VAT rate on mobile phone set assembling, provision extending for one more year;
  • Fully VAT exemption on locally produced mustard oil and agricultural machineries;
  • VAT exemption on up to 60 AMP solar battery production for partner organizations of Infrastructure Development Company Ltd (IDCOL);
  • 5 percent VAT rate on domestic production of Loaded PCB (Printed Circuit Board), Unloaded PCB and Router;
  • 5 percent VAT rate (currently 15 percent) on manufacturing potato flakes made of locally produced potatoes and maize starch;
  • Imposing fixed VAT at the rate of 6 taka per kg from the existing 5 percent ad valorem VAT on Polyester, Rayon and all other synthetic yarn, and at the rate of 3 taka per kg from the existing 4 taka per kg on all kinds of Cotton Yarn;
  • Exempting VAT on Test kits of Covid-19 on the import, manufacturing and trading stages;
  • Exempting VAT on locally manufactured Personal Protective Equipment (PPE) and Surgical Mask (including face mask) on manufacturing and trading stages;
  • Exempting VAT on COVID-19 medicines at the import, manufacturing and trading stages;
  • Increasing VAT rate to 7.5 percent (currently 5 percent) on the showroom stage of furniture; and
  • Increasing VAT rate to 10 percent (currently 5 percent) on air-conditioned launch services.

Excise duty

Excise duty is now collected on Bank Accounts and Airline tickets under the Excises and Salt Act, 1944. The Finance minister proposed to fix the excise duty rates on bank balance at the following rates:

  • In cases where the balance exceeds Tk. 10 lakh but does not exceed Tk. 1 crore, Excise duty has been proposed to increase from Tk. 2,500 to Tk. 3.000;
  • In cases where the balance exceeds Tk. 1 crore but does not exceed Tk. 5 crore, Excise duty has been proposed to increase from Tk. 12,000 to Tk. 15,000; and
  • In cases where the balance exceeds Taka 5 crore, Excise duty has been proposed to increase from Tk. 25,000 to Tk. 40,000.

However, the applicable excise duty rates will remain unchanged in cases where the bank account balance does not exceed Tk. 10 lakh at any time during a year.

Customs Duty

The proposal includes existing 6 slabs of Customs Duty (0%, 1%, 5%, 10%, 15%, and 25%), 3% Regulatory Duty on goods having highest import duty, and existing 12 slabs of Supplementary Duty (10%, 20%, 30%, 45%, 60%, 100%, 150%, 200%, 250%, 300%, 350%, and 500%) on import stage to continue in FY 2020-21. Besides, existing 0 percent import duty will remain unchanged for importing essential commodities, fertilizers, seeds, lifesaving drugs and raw cotton along with raw materials for some industries.

Supplementary duty

The proposal contains following revised Supplementary duty (SD) rates:

  • SD rate increased from 10 percent to 15 percent for all kinds of services rendered by BRTA for car and jeep registration and related services;
  • SD rate increased from 25 percent to 30 percent for chartered aircrafts and helicopters;
  • SD rate increased from 10 percent to 15 percent on the services provided through mobile phone SIM/RIM card;
  • SD rate increased from 5 percent to 10 percent on locally manufactured cosmetics; and
  • Imposing 10 percent Supplementary duty on Ceramic Sink, Basin at the manufacturing stage.