VAT in Bangladesh 2026: Law, Rates and Who Must Pay

VAT in Bangladesh: the 2026-27 legal framework

VAT in Bangladesh is the single largest source of domestic revenue, and it reaches almost every business that sells goods or services. It is charged under the Value Added Tax and Supplementary Duty Act 2012 and the VAT and Supplementary Duty Rules 2016, administered by the National Board of Revenue, and reset every July by a Finance Act. The standard rate is 15%, but a dense schedule of reduced rates, fixed amounts, exemptions and supplementary duties means the real rate depends on what is supplied, at which stage and by whom.

This guide sets out the law for the 2026-27 fiscal year: registration and the Business Identification Number, rates, turnover tax, input tax credit, Mushak forms and returns, VAT deduction at source, penalties and appeals. It also explains the 2025 and 2026 changes, and when a business should bring in a VAT lawyer.

Summary: VAT is charged at 15% on most supplies and imports, with reduced rates and fixed amounts for listed goods and services. A business must register and obtain a BIN once turnover exceeds Tk 50 lakh in twelve months, or regardless of turnover for imports, exports, tenders and other listed activities; businesses between Tk 30 lakh and Tk 50 lakh enlist for 4% turnover tax. From 2026-27 returns are filed quarterly by default, appeal pre-deposits have fallen to 1% and 2%, and a BIN is required to open business bank accounts, renew trade licences and obtain utility connections.

Key point: The Finance Act 2026 turned the BIN into a gateway document. A business that needs a current account, a bank loan, a trade licence renewal, an MFS merchant account, trade body membership, an electricity or gas connection or a BRTA vehicle registration must now show a BIN or turnover tax enlistment certificate. Staying outside the VAT system is no longer a practical option for a formal business.

At a glance

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Table of Contents

The law that governs VAT in Bangladesh

The Value Added Tax and Supplementary Duty Act 2012 (Act No. 47 of 2012) is the core statute. It replaced the Value Added Tax Act 1991 and has been amended by almost every Finance Act since it took effect in July 2019. Section 15 imposes VAT on every taxable import and taxable supply, section 55 imposes supplementary duty on listed goods and services, and section 63 imposes turnover tax on enlisted businesses.[1] The procedural detail sits in the VAT and Supplementary Duty Rules 2016, which prescribe the application, invoice, book-keeping and return forms known in practice as Mushak forms.[2]

Authentic English texts

The NBR published the authentic English text of the VAT and SD Act in the Gazette on 13 November 2025 under SRO No. 440-Law/2025/326-Mushak, and the English text of the 2016 Rules on 10 November 2025.[3] These texts consolidate amendments up to the Finance Ordinance 2025, so later changes must be read in alongside them.

Finance Acts and SROs

Rates, exemptions and procedures move every year through the Finance Act and statutory regulatory orders (SROs). The Finance Act 2026 (Act No. 96 of 2026) received assent on 30 June 2026 and amended the VAT and SD Act from 1 July 2026.[4] The NBR's VAT instruction of 11 June 2026 explains each amendment to field officers.[7] Any position on VAT in Bangladesh therefore starts by fixing the tax period and the version of the law that applied to it.

Who administers VAT in Bangladesh

The NBR administers VAT through Customs, Excise and VAT Commissionerates, and through Customs at the import stage. In November 2025 the Act was amended to fit the Revenue Policy and Revenue Management Ordinance 2025, which separates tax policy from administration.[13] In August 2026 the Finance and Planning Minister, Amir Khasru Mahmud Chowdhury, confirmed that the split of the NBR into two divisions had been finalised.[14] For the wider system, see our guide to tax law in Bangladesh.

Who must register for VAT in Bangladesh: BIN and thresholds

A registered person receives a certificate bearing a Business Identification Number (BIN), issues tax invoices, claims input tax credit and files returns. A person between the enlistment and registration thresholds is enlisted for turnover tax instead.

The turnover thresholds

Under section 4 a person must register where turnover exceeded the registration threshold in the previous twelve months, or is expected to in the next twelve. The registration threshold is Tk 50 lakh and the enlistment threshold Tk 30 lakh, excluding exempt supplies and sales of capital assets.[1] These figures date from the Value Added Tax and Supplementary Duty (Amendment) Ordinance 2025, which lowered the registration threshold from Tk 3 crore to Tk 50 lakh and the enlistment threshold from Tk 50 lakh to Tk 30 lakh.[9]

Registration regardless of turnover

Section 4(2) requires registration whatever the turnover for any person who supplies, manufactures or imports goods or services subject to supplementary duty; supplies through a tender, agreement or work order; carries on an import or export business; establishes a branch, liaison or project office of a foreign organisation; is appointed a VAT agent; or operates in a specific activity or area prescribed by the NBR.[1] This catches most foreign-owned businesses and most suppliers to government and large companies from their first transaction.

How to register and obtain a BIN

The application must be made within 15 days of the obligation arising, on Mushak-2.1 for a resident or Mushak-2.2 for a non-resident, and the certificate is issued on Mushak-2.3.[2] Since 1 July 2026 registration is fully automated on the e-VAT system and a BIN is issued as soon as valid information is submitted.[5] A business that keeps centralised, software-based accounts for similar supplies from several places may take central registration; otherwise each place of supply needs its own registration.[1] Our guide to VAT registration for companies covers the process step by step.

The BIN as a gateway document from 2026-27

The Finance Act 2026 inserted section 4(3), which requires a BIN or turnover tax enlistment certificate for seven transactions: opening or operating a current or STD account with a bank, NBFI or other financial institution; taking a loan; renewing a trade licence; opening a mobile financial services merchant account; obtaining or renewing trade association membership; obtaining an electricity or gas connection in a business's name; and registering a business vehicle with BRTA.[4] [7] PwC notes that this extends the registration net to businesses making only exempt supplies.[5]

Before the budget, BIN-holding entities had risen to about 775,000, including 131,000 added in a December 2025 drive.[11] A business registering late should first check its exposure for historic periods.

VAT rates in Bangladesh for 2026-27

Section 15(3) fixes the rate of VAT on taxable imports and taxable supplies at 15%. The government may set reduced rates or a specific amount of tax for goods and services listed in the Third Schedule, and a registered person may elect to pay the full 15% instead of a reduced rate or specific amount.[1] The election matters because credit is generally available only on standard-rated and zero-rated supplies.

Reduced rates and fixed amounts

The reduced rates in force are 1.5%, 2%, 2.4%, 4.5%, 5%, 7.5% and 10%, and some products carry a fixed amount of VAT instead of a percentage.[6] The authentic English text of the Third Schedule shows how these rates are allocated. Information technology enabled services, ride sharing, English-medium schools, internet agencies and electricity distribution appear at 5%; furniture manufacturers and showrooms and LP gas at 7.5%; and construction firms and procurement providers at 10%.[1] Supplies at the local trading stage are generally charged at 7.5%, land developers at 2%, and building sales at 2% up to 1,600 square feet and 4.5% above that.[1]

Changes to rates in the Finance Act 2026

The 2026-27 budget made targeted changes. Gold, silver, platinum and diamond jewellery moved from 5% ad valorem VAT to fixed VAT per bhori, at Tk 2,500 for gold, platinum and diamonds and Tk 100 for silver. Online advertising received its own service code at 5% VAT. Supplies by registered start-ups were exempted from VAT and from deduction at source by the buyer, the fixed Tk 300 VAT per e-SIM was withdrawn, and a 1% health surcharge was added on nicotine pouches and heated tobacco.[5] The First Schedule was also amended to exempt services supplied by content creators and freelancers.[4]

Exempt and zero-rated supplies

Goods and services in the First Schedule are exempt, and the government may grant further exemptions by notification. Exports are zero-rated.[6] The difference matters: an exporter charges no VAT but recovers input tax, while an exempt supplier cannot. Many exemptions are time-limited, with mobile phones, technology goods and electric-vehicle manufacture extended to 30 June 2030, so each one relied on should be diarised.[5]

Supplementary duty

Supplementary duty is a separate tax on goods and services listed in the Second Schedule, generally at 10% to 67% and up to 500% in some cases, payable only at the first stage of supply. For tobacco and alcohol, VAT and supplementary duty are calculated on the maximum retail price.[6] The 2026 budget replaced the Second Schedule table, with cigarettes under HS 2402.20.00 at 350% and beer at 250%, and let the NBR require tax stamps, band rolls or QR codes on any goods subject to supplementary duty.[4] Excise duty is a separate levy, covered in our note on the 2025 excise duty changes.

Turnover tax for small businesses

Turnover tax is the simplified regime for businesses that cross the enlistment threshold of Tk 30 lakh but stay below the Tk 50 lakh registration threshold. Section 63, as substituted by the Finance Act 2026, lets the government notify fixed turnover tax amounts by sector and region, capped at Tk 2 lakh; until it does, turnover tax is charged at 4% of turnover.[4] The Finance Bill had proposed removing the enlistment threshold altogether, but that proposal was not enacted.[5]

The new section 10 requires a person who crosses the enlistment threshold to apply through the e-VAT system within 30 days, and a valid application is approved automatically with a turnover tax certificate bearing a BIN.[4] Enlisted persons file the turnover tax return on Mushak-9.2.[2] Turnover tax cannot be credited, so an enlisted business is unattractive to corporate buyers, and a growing supplier often benefits from registering voluntarily. A voluntary registrant must comply fully and cannot cancel within the first year.[1]

Input tax credit: how the credit chain works

Under section 46 a registered person sets off VAT paid on inputs against output VAT on its own supplies, so the tax falls on the final consumer.[1] Input tax credit is where most disputes over VAT in Bangladesh begin, because the conditions are strict and tested line by line in audit.

Conditions for claiming credit

• Time limit: credit must be taken in the tax period in which the inputs were purchased or within the following six tax periods, a window extended from four periods by the Finance Ordinance 2025.[1]
• Banking channel: credit is denied where a taxable supply above Tk 1 lakh is not paid in full through a bank or mobile banking channel.[1]
• Proper documents: the input must be supported by a Mushak-6.3 tax invoice or goods declaration naming both buyer and seller with their registration numbers, and recorded in the purchase book.[1] [6]
• Coefficient declaration: a manufacturer cannot claim credit on inputs not declared in its Mushak-4.3 input-output coefficient.[1]

Blocked credits

No credit is available on inputs used for exempt supplies, on turnover tax, on supplementary duty paid on inputs, or on inputs for supplies charged below 15% or at a fixed amount, other than exports.[1] PwC's summary of the current rules also lists passenger vehicles, entertainment, employee welfare, vehicle purchase or lease and rent of premises among the inputs on which credit cannot be claimed.[6]

2026 changes to input tax credit

"Labour" was removed from the items excluded from the definition of input, which should reduce disputes over outsourced personnel. Where goods are sold below input cost, credit is now allowed in proportion to the output VAT rather than denied in full.[5] Against that, a trader selling goods exempt at manufacturing stage pays 15% only on its value addition and faces credit restrictions.[4]

Carry forward and refunds

Where input tax and decreasing adjustments exceed output tax in a period, the excess is carried forward and set off over the next six tax periods. After that, a balance of up to Tk 50,000 continues to be carried forward, and a larger balance is refundable within three months of an application.[1] Businesses with at least half of their turnover from zero-rated supplies, such as exporters, can apply for a refund without first carrying the balance forward.[1]

Mushak forms, books and VAT returns

Compliance with VAT in Bangladesh is document-driven. The 2016 Rules prescribe a form for almost every step, and the forms most businesses use are summarised below.

Quarterly returns from 2026-27

Until June 2026 every registered person filed a monthly return on Mushak-9.1 by the fifteenth day of the following month.[11] The Finance Act 2026 redefined the tax period as a calendar month and substituted section 64.[4] Quarterly filing is now the default for registered and enlisted persons: a single return covering three tax periods is due by the fifteenth day after the quarter ends, and monthly filing remains optional.[5] [12] Government bodies, banks, insurers and nil-return filers have 20 days.[4] A proposal for monthly advance deposits was not enacted, so payment follows the return deadline.[5]

Which return form applies

Manufacturers, service providers and traders claiming input tax credit file Mushak-9.1. Other registered persons, including traders who do not claim credit and commercial importers under final settlement, file Mushak-9.1.1, which does not permit credit claims.[5] Manual filing ended on 1 July 2026, and returns must now be filed online through the NBR portal.[6]

Books and record-keeping

A registered person keeps a purchase book on Mushak-6.1, a sales book on Mushak-6.2 and, if it resells goods without processing, a combined purchase-sales book on Mushak-6.2.1. It issues credit notes on Mushak-6.7 and debit notes on Mushak-6.8.[2] All records must be kept for five years.[1] From 2026-27 records kept in ERP or NBR-approved VAT software on a secure server are legally valid and may be submitted electronically, so a clean ERP trail now carries evidential weight in audit.[4]

VAT deduction at source (VDS)

VAT deduction at source shifts part of the collection burden to the buyer. Under section 49 a withholding entity buying a taxable supply must deduct the prescribed VAT from the price and deposit it with the treasury, may not buy from an unregistered supplier who issues no tax invoice, and is jointly and severally liable with the supplier.[1]

Withholding entities include government bodies, approved NGOs, banks and financial institutions, secondary and higher educational institutions, limited companies and businesses with turnover above Tk 10 crore. Selected rates include 15% for air-conditioned hotels, 10% for construction contractors and procurement providers, 5% for online advertising and IT-enabled services, and 4.5% for building construction above 1,600 square feet. The withholder issues a Mushak-6.6 certificate, and the supplier uses it to adjust its own liability.[6] The Finance Act 2026 added semiconductor assembly, testing and packaging services at 15% and online advertising at 5% to the mandatory list.[5]

A withholding entity that fails to deduct and deposit pays the VAT with interest as if it were the supplier, and the entity, the responsible officer and its executive officer may each be fined up to Tk 25,000 for late deposit.[1] Our guide to VAT deduction at source covers the 2025 rules and full rate schedule.

Imported services and the reverse charge

Services bought from abroad are taxed through a reverse charge. The Finance Act 2026 substituted section 20 so that imported services, other than those exempt under the First Schedule, are taxable at 15% and the liability rests on the recipient in Bangladesh. The bank or authorised dealer remitting the payment deposits the VAT with the treasury at the time of payment, and the treasury challan serves as the recipient's tax invoice; where the service is an input, credit is available under section 46 subject to its conditions.[4]

Software licences, cloud subscriptions, management fees and royalties paid to foreign group companies are the usual triggers. The same payment usually attracts income tax withholding too, so both should be reviewed with the international tax position.

VAT liability for businesses: where exposure arises

VAT liability for businesses in Bangladesh goes well beyond the tax on their own sales. A company is exposed for output VAT it fails to charge, credit claimed without the right documents, VAT it should have deducted from suppliers, reverse-charge VAT and supplementary duty. Since 2026 it is also exposed for its software: tampering with data in NBR-approved VAT software now attracts penalties for users and software providers alike.[4] [5]

Tax determination and the five-year window

Section 73 allows a show-cause notice where a return appears inaccurate, is not filed, tax is unpaid or a refund was wrongly obtained. The officer must finalise the determination within 120 days of the objection or notice, with payment due at least 15 working days after service. A determination generally cannot be made more than five years after the tax period, or three years for a 100% export-oriented industry, unless there is fraud, wilful neglect, non-filing or concealment.[1]

Audit

From 2026-27 a business selected for audit must submit documents within two months of notice, with a possible one-month extension, and the audit must finish within one year; otherwise the officer may make a best-judgment assessment.[4] The limits stop open-ended audits but leave little time to rebuild missing records. TRW's tax compliance practice runs pre-audit reviews for that reason.

Penalties, interest and offences

Section 85 sets a schedule of penalties for non-compliance, irregularity and evasion. A penalty is payable in addition to the tax, interest and any fine, and except for late returns the officer must give the taxpayer a hearing before imposing it.[1]

• Administrative failures: Tk 10,000 each for late registration, not displaying the certificate, not notifying changes, not issuing invoices, notes or withholding certificates, poor records, or a late input-output coefficient.[1]
• Late returns: Tk 2,000, reduced from Tk 5,000 by the Finance Ordinance 2025.[1]
• Omitted output tax: between 30% and 50% of the output tax not included in the return.[1]
• Irregular credits and adjustments: reduced by the Finance Act 2026 to between 30% and 50%, from a previous range of half to the full amount.[4] [5]
• Evasion: between half and the full amount of tax evaded, with new penalties of at least the evaded tax and up to double for unstamped or counterfeit-marked tobacco products and for manipulation of VAT software.[1] [4]

Interest on unpaid VAT

Under section 127, unpaid tax and irregularly claimed credits or decreasing adjustments carry simple interest at 1% per month from the day after the due date, capped at 24 months.[1] Section 85(2a) gives an important protection: where tax was underpaid through mistake or misrepresentation and the taxpayer later pays the final tax with interest, no penalty is imposed.[1] A voluntary correction before an audit is therefore usually far cheaper than waiting for a demand.

The 2026 interest settlement window

The Finance Act 2026 inserted section 137A, a special payment scheme running for six months from 1 July 2026. Arrears under the repealed VAT Act 1991 and under the 2012 Act for periods before 1 July 2022 paid within the window carry interest for no more than 24 months.[4] [5] Businesses with legacy demands under appeal should model whether paying within the window is cheaper than continuing the dispute.

The Act also creates criminal offences for false statements, misuse of certificates and obstruction, and a penalty does not bar a criminal case on the same facts.[1]

VAT appeals and dispute resolution

Disputes over VAT in Bangladesh follow a structured route of challenge, and the 2026 cut in pre-deposits has made it far more accessible.

Commissioner (Appeals)

An order of an Additional Commissioner or a lower-ranking officer can be appealed to the Commissioner (Appeals) within 90 days of the order. If the appellant shows obvious reasons for delay, the Commissioner (Appeals) may allow filing within a further 60 days. The appeal must be decided within one year, failing which it is deemed allowed.[1] The Finance Act 2026 reduced the pre-deposit from 10% to 1% of the tax demanded, excluding penalty.[4]

Customs, Excise and VAT Appellate Tribunal

Orders of a Commissioner, the Commissioner (Appeals) or the Director General can be appealed to the Appellate Tribunal within 90 days of service, again with a possible 60-day extension for reasonable cause. The Tribunal can stay collection of the tax, but a stay lapses after six months unless the appeal has been decided, and an appeal not decided within two years is deemed allowed.[1] The Finance Act 2026 substituted the deposit rule so that an appellant pays 1% of the tax, excluding penalty.[4]

High Court Division

A taxpayer or senior VAT officer aggrieved by an order of the Tribunal or the NBR may appeal to the High Court Division on questions of law, and the Code of Civil Procedure applies as far as possible. The pre-deposit fell from 10% to 2% under the Finance Act 2026.[1] [4] Constitutional challenges to the vires of an SRO or to a demand made without jurisdiction may also be brought by writ petition; see our guide to writ petitions in Bangladesh.

Alternative dispute resolution

Section 125 lets a taxpayer apply to a facilitator from an NBR panel to settle a dispute by agreement. A settlement reached through ADR cannot be challenged in court, and time spent in an unsuccessful ADR does not count against the appeal deadline. The route is not available for offences or questions of law.[1] For a factual dispute about valuation, coefficients or documents, ADR is often the fastest way to close a demand. TRW's tax disputes practice handles each stage.

Changes to VAT in Bangladesh in 2025 and 2026

The last two years changed VAT in Bangladesh more than any period since the 2012 Act took effect.

2025: the amendment ordinance and the Finance Ordinance

On 9 January 2025 the interim government issued the Value Added Tax and Supplementary Duty (Amendment) Ordinance 2025 (Ordinance No. 1 of 2025), which lowered the thresholds and raised VAT and supplementary duty on many goods and services.[8] [9] On 22 January 2025 the NBR withdrew several increases, including for pharmaceuticals, internet services and most restaurants, and cut the rate for non-air-conditioned hotels, sweet shops and branded apparel from 15% to 10%.[10] The ordinance has since been repealed by the Value Added Tax and Supplementary Duty (Amendment) Act 2026 (Act No. 77 of 2026).[8] Our note on the 2025 VAT and SD amendment ordinance tracks its status.

The Finance Ordinance 2025 (Ordinance No. 28 of 2025), effective 1 July 2025, extended the credit window to six tax periods, cut the late-return penalty to Tk 2,000 and reduced the penalty for omitted output tax to 30% to 50%.[1] In November 2025 the authentic English texts were published.[3]

2026: the Finance Act 2026

The 2026-27 budget made the BIN a gateway document, moved returns to a quarterly default, automated registration, rewrote the reverse charge, accepted ERP records as evidence, imposed audit time limits, introduced the section 137A interest scheme and cut appeal pre-deposits.[4] [5] A Dhaka Chamber workshop in August 2026 put registration, quarterly filing and the cheaper appeal route at the top of members' agenda.[12]

Step-by-step VAT compliance for a business

The following sequence reflects how TRW sets up and reviews compliance with VAT in Bangladesh, from a new subsidiary to an established group.

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Two habits prevent most problems. Reconcile purchase books, Mushak-6.6 certificates and bank payments every quarter before the return is filed, and diarise the six-period credit window and every appeal deadline the moment a notice arrives.

When to instruct a VAT lawyer in Bangladesh

Most VAT work is routine compliance that a competent finance team and VAT consultant can manage. A VAT lawyer adds value where the question is legal rather than arithmetic, or where the money at stake makes the process itself a risk.

• Structuring: market entry, supply-chain changes, government contracts and cross-border service agreements, where classification drives the rate and the credit.
• Exemptions and SROs: whether an exemption applies, has expired, or rests on an SRO within the powers of the Act.
• Show-cause notices and appeals: a reasoned objection within the deadline that preserves every ground, and the choice between appeal, ADR and writ.
• Investigations and transactions: allegations of evasion with criminal exposure for directors, and VAT due diligence where historic liabilities follow the business.

The best advisers combine statutory knowledge with forum experience. TRW's tax structuring and tax disputes teams work together on that basis, and our guide to corporate income tax in Bangladesh covers the income tax side of the same transactions.

What to watch for VAT in Bangladesh in 2026-27

Three developments matter most. The BIN gateway will bring many small businesses into the system, with bank, MFS and trade-body data matched against VAT records.[11] Online-only returns and ERP evidence point toward data-led audit selection.[14] And the split of the NBR will change who writes VAT rules and who enforces them.[13] Register, keep records that would satisfy an auditor today, check every reduced rate against the current schedule, and act on notices in time. For a clear view of your position, contact TRW.

Frequently asked questions

What is the VAT rate in Bangladesh in 2026?

The standard rate is 15% on taxable supplies and imports under section 15 of the VAT and SD Act 2012. Reduced rates of 1.5% to 10% and fixed amounts apply to goods and services listed in the Third Schedule.[1] [6]

When must a business register for VAT in Bangladesh?

When turnover exceeds Tk 50 lakh in twelve months, or is expected to, and regardless of turnover for importers, exporters, tender suppliers, supplementary duty businesses and branch or liaison offices of foreign organisations. The application must be made within 15 days.[1] [2]

What is a BIN and when is it required?

A Business Identification Number is the number on a VAT registration or turnover tax enlistment certificate. From 1 July 2026 it is required to open business bank accounts, take loans, renew trade licences, open MFS merchant accounts, join trade bodies, obtain electricity or gas connections and register vehicles with BRTA.[4]

What is turnover tax?

A simplified tax for businesses with turnover between Tk 30 lakh and Tk 50 lakh. It is charged at 4% of turnover until the government notifies fixed amounts, capped at Tk 2 lakh, and no input tax credit is available.[1] [4]

How often are VAT returns filed in Bangladesh?

From 2026-27, quarterly by default, by the fifteenth day after the quarter ends, with monthly filing optional. Returns must be filed online on Mushak-9.1 or Mushak-9.1.1.[5] [6]

How long do I have to claim input tax credit?

Credit must be claimed in the tax period in which the inputs were bought or within the next six tax periods, and payments above Tk 1 lakh must go through a bank or mobile banking channel.[1]

Who must deduct VAT at source?

Withholding entities, including government bodies, NGOs, banks and financial institutions, educational institutions, limited companies and businesses with turnover above Tk 10 crore. They issue a Mushak-6.6 certificate to the supplier.[6]

What interest applies to unpaid VAT?

Simple interest at 1% per month from the day after the due date, for no more than 24 months. Arrears arising from VAT deduction at source carry 2% simple interest for each six months.[1]

How much must be deposited to appeal a VAT demand?

Since the Finance Act 2026, 1% of the tax demanded, excluding penalty, before the Commissioner (Appeals) or the Appellate Tribunal, and 2% before the High Court Division. Appeals to the first two forums must be filed within 90 days.[1] [4]

How far back can the VAT authority assess?

Generally five years after the tax period, or three years for a 100% export-oriented industry, unless there is fraud, wilful neglect, non-filing or concealment.[1]