On 1 June 2023, the Finance Minister, Mr. AHM Mustafa Kamal presented the budget in parliament for the fiscal year 2023-24, aiming to accelerate economic growth, promote social development, and address key challenges faced by the nation. The budget reflects a comprehensive approach to boost various sectors, foster innovation, and ensure sustainable development across the country.

The projected size of the national budget for the fiscal year 2023-24 is expected to be Tk 7.60 trillion, equivalent to Tk. 760,000 crore. The target for total income in the budget is set at Tk 5 trillion, equivalent to Tk. 500,000 crore. Out of this amount, the National Board of Revenue (NBR) aims to generate Tk 4.3 trillion in revenue. The budget deficit is estimated to exceed Tk 2.5 trillion. The upcoming budget aims for a GDP growth rate of 7.5 per cent, while the inflation rate is projected to be 6.5 percent.

Individual Tax

The finance minister proposed an increase in the tax-free income threshold for male taxpayers from Tk. 3 lakhs to Tk. 3 lakhs 50 thousand. For female taxpayers and taxpayers above 65 years of age, the tax-free threshold will be increased from Tk. 3 lakhs 50 thousand to Tk. 4 lakhs. The proposed changes in tax-free income thresholds, tax rates, and tax slabs for all categories of individual taxpayers, excluding companies and local authorities, are presented in the following table:

Tax-free Income Threshold

The income tax-free threshold would be increased for parents or legal guardians of physically challenged child or dependent by Tk. 50 thousand for each child/ dependent.

Tax rates

Minimum Tax

Existing minimum tax for an individual taxpayer residing in Dhaka North City Corporation, Dhaka South city corporation and Chittagong City Corporation is Tk. 5,000, any other city corporation is Tk. 4,000 and other area is Tk. 3,000.

However, he also proposes to make the minimum tax Tk. 2000 among competent people who are below taxable income but has obligation to submit income tax return to take service from government with a view to circulating this participation in government welfare work.

Surcharge

Mr. Kamal proposes to raise the limit of surcharge from Tk. 3 crore to Tk. 4 crore with a minimum surcharge amounting to 10 percent, where net wealth of an individual exceeds Tk. 4 crore and 35 percent surcharge for individuals who have net wealth exceeding Tk.100 crore.

Corporate Tax

From FY2020-2021 to FY2022-23 the corporate tax rate has been reduced every year. Considering all factors, as a part of efforts to achieve tax GDP growth targets it was proposed to retain the existing structure of corporate tax rate and policies.

Value-Added Tax (VAT)

In order to increase revenue collection in the financial year 2023-24, the following proposal was introduced:

a) imposing 15 percent VAT on ball point pen at the manufacturing stage;

b) imposing 5 percent VAT on software production and customization services;

c) withdrawing full exemption and imposition of 5 percent VAT at the local manufacturing stage on poly propylene staple fiber and to continue existing exemption on import of basic raw material till June 30, 2024;

d) imposing 7.5 percent VAT instead of existing 5 percent VAT at local manufacturing stage on iron or steel (LPG Cylinder) and to continue this exemption till June 30, 2024;

e) extending the notification period till June 30, 2024 for mobile phone manufacturer/assembler by imposing 2 percent instead of 0 (zero) percent, 5 percent instead of 3 and 7.5 percent instead of 5 percent respectively at local stage.

f) introducing 7.5 percent VAT instead of 5 percent on all types of plastic tableware, kitchenware, household articles, hygiene and toilet articles including any similar products (except tiffin boxes and water bottles);

g) introducing 7.5 percent VAT instead of 5 percent on kitchen towel (24-26 gsm), Toilet tissue (18-24 gsm), Napkin tissue (20-24 gsm), Facial tissue/pocket tissue (12-16 gsm), Hand towel/Paper towel/clinical bed;

h) introducing 7.5 percent VAT instead of 5 percent on aluminum and kitchen or other household articles, sanitary ware and parts made of aluminum; and

i) introducing 7.5 percent VAT instead of 5 percent on sunglasses (plastic and metal framed).