VAT Law Changes in Bangladesh: From the 2025 Ordinance to the 2026 Acts

VAT law changes in Bangladesh: the 2025 to 2026 sequence

VAT law changes in Bangladesh between January 2025 and October 2026 came faster than at any time since the Value Added Tax and Supplementary Duty Act 2012 took effect. An interim-government ordinance cut the registration threshold and pushed dozens of reduced rates up to 15%; a notification two weeks later withdrew part of the increase; Parliament converted the ordinance into an Act in April 2026; the Finance Act 2026 rewrote registration, returns, credits and appeals from 1 July 2026; and a fresh ordinance gazetted on 14 October 2026 brought back monthly returns.

This TRW Insight traces that sequence instrument by instrument. It explains what the Value Added Tax and Supplementary Duty (Amendment) Ordinance 2025 actually did, what the 2026 amending Act and the Finance Act 2026 kept, changed or reversed, the position as verified in October 2026, and what each change means for pricing, filing, audits and disputes. For the mechanics of computing tax, read our guide on how to calculate VAT in Bangladesh; for the full regime in one place, see VAT in Bangladesh.

Summary: The January 2025 ordinance lowered the registration threshold from Tk 3 crore to Tk 50 lakh, set the turnover tax band at Tk 30 lakh to Tk 50 lakh, raised the local trading-stage rate to 7.5% and lifted many reduced rates and supplementary duties. Parliament kept those changes when it converted the ordinance into the VAT and Supplementary Duty (Amendment) Act 2026. The Finance Act 2026 then added the BIN gateway, quarterly returns, wider input credit and cheaper appeals, and an October 2026 ordinance restored monthly returns.

Key point: The 2026 amending Act confirmed the 2025 ordinance rather than undoing it. The thresholds and most rate increases introduced on 9 January 2025 remain the law; the real reversals came through notifications in January 2025 and the October 2026 return-filing ordinance.

At a glance

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Table of Contents

Why VAT law changes in Bangladesh came so quickly

Bangladesh had an interim government from August 2024 until the elected government took office after the February 2026 elections. With no Parliament sitting, tax law was changed by ordinance. The government's stated reasons for the January 2025 VAT ordinance were to widen the VAT net, move reduced rates gradually towards standard levels, meet revenue targets and improve the tax-to-GDP ratio.[6] When the ordinances that dissolved the National Board of Revenue's single structure were issued in November 2025, the January increases on roughly a hundred goods and services were described as emergency measures taken on IMF advice.[5]

The result is a compressed legislative history. A business that priced a contract in December 2024, issued invoices through 2025 and is being audited in 2026 may need to apply four or five different versions of the same schedule to one relationship. That is why the date of each instrument matters as much as its content.

Three layers of change: ordinances and Acts, Finance Acts, and SROs

VAT law in Bangladesh moves through three channels. The first is direct amendment of the 2012 Act by a standalone ordinance or Act, as happened in January 2025 and October 2026. The second is the annual Finance Act, which amends the Act and its schedules each July. The third is statutory regulatory orders (SROs) issued under the Act, which grant exemptions, reduce rates or set conditions without touching the statutory text. A rate printed in a schedule can therefore be displaced by an SRO, and an SRO can be replaced without notice to anyone who is not watching the gazette.

The 2012 Act remains the base

None of the 2025 or 2026 instruments replaced the 2012 Act. Each amended specified sections or schedules within it. The authentic English text of the Act, published under SRO No. 440-Law/2025/326-Mushak dated 5 November 2025, consolidates the amendments up to the Finance Ordinance 2025 and footnotes the instrument behind each change.[1] It is the best single map of the 2025 changes, but it predates the 2026 Acts, so later instruments must be read alongside it.

The 2025 ordinance: what the January VAT law changes did

The Value Added Tax and Supplementary Duty (Amendment) Ordinance 2025, formally Ordinance No. 01 of 2025, took effect on 9 January 2025.[1] It was issued alongside an Excises and Salt (Amendment) Ordinance on the same day.[6] Its structure is simple: section 2 amended the definitions that set the thresholds, section 3 amended the Second Schedule on supplementary duty, and section 4 amended the Third Schedule on reduced and fixed rates, mostly by deleting entries so that the standard 15% would apply.[1]

Registration and turnover tax thresholds

Section 2 of the ordinance replaced the registration threshold of Tk 3 crore with Tk 50 lakh, and lowered the enlistment threshold for turnover tax to Tk 30 lakh.[1] Before the change, businesses with turnover between Tk 50 lakh and Tk 3 crore paid turnover tax; afterwards, turnover tax applied only between Tk 30 lakh and Tk 50 lakh, and anything above Tk 50 lakh fell into full VAT registration.[2] [3] Turnover excludes exempt supplies and the sale of capital assets.[1] For many small and medium businesses this was the most consequential change of the period, because it brought them into the credit-and-invoice system for the first time.

Reduced rates pushed to 15%

Section 4 removed a long list of reduced-rate entries from the Third Schedule. As reported when the ordinance was issued, VAT on restaurants and event management rose from 5% to 15%; on non-air-conditioned hotels, sweet shops and branded apparel showrooms from 7.5% to 15%; on biscuits from 5% to 15%; and on kitchen towels, toilet and facial tissues and napkins from 7.5% to 15%.[3] The ordinance also substituted the trading-stage paragraph of the Third Schedule, so that the general rate on goods supplied at the local trading stage became 7.5%, up from 5%, with 3% for medicines and 2% for petroleum products.[1] [3]

Supplementary duty increases

Section 3 raised supplementary duty on a range of imports and supplies. Reported examples include fruit juice at import from 20% to 30%, unmanufactured tobacco at import from 60% to 100%, betel nuts from 30% to 45%, bills at hotels and restaurants serving alcohol from 20% to 30%, and a new 10% on limestone and dolomite.[3] Cigarette price tiers were raised, with supplementary duty on the lowest tier going from 60% to 67%, and supplementary duty on mobile phone services was increased.[3] The schedule text also changed the supplementary-duty rows for paints and similar products.[1]

The companion excise changes

The Excises and Salt (Amendment) Ordinance issued the same day raised excise duty on air tickets, for example on domestic flights from Tk 500 to Tk 700.[3] Excise is a separate statute, and its later history is covered in our note on historic excise schedules after the 2026 repeal.

The January 2025 rollback by notification

Within two weeks the government retreated on several of the most visible increases. On 22 January 2025 the NBR announced four notifications that withdrew the additional VAT on medicines at the trading stage, restoring 2.4%; withdrew the increased duty on mobile SIM and RIM services and the new duty on internet service providers; restored the previous VAT rates for restaurants other than three-, four- and five-star hotels, and for motor garages and workshops; reduced VAT for non-air-conditioned hotels, sweet shops and branded apparel from 15% to 10%; and removed VAT on non-branded clothing.[4]

Why the statute and the effective rate diverged

The rollback did not amend the ordinance. It worked through exemption and reduced-rate notifications issued under the Act, so the statutory schedule still shows the higher figures while the effective rate is lower. The consolidated English text, for example, still prints 3% for medicines at the trading stage.[1] Anyone reading only the Act, or only a news report of the ordinance, will reach the wrong rate. The correct position for any supply is the schedule rate as modified by every SRO in force on the date of supply, and that requires checking the notification, its conditions and its expiry date.

The rest of 2025: the Finance Ordinance and the revenue reform

With no Parliament to pass a budget, the 2025-26 fiscal measures were also made by ordinance. The Finance Ordinance 2025 (Ordinance No. 28 of 2025) took effect on 1 July 2025.[1] Among its VAT changes, it extended the period within which input tax credit may be taken from the following four tax periods to the following six, and reduced the penalty for failing to file a VAT or turnover tax return on time from Tk 5,000 to Tk 2,000.[1] Two further ordinances amending the Finance Ordinance followed on 26 June and 6 October 2025.[6]

Separating tax policy from administration

On 6 November 2025 the interim government issued ordinances amending the Income Tax Act, the Customs Act and the VAT Act to fit the Revenue Policy and Revenue Management Ordinance introduced that May. The reform splits the NBR's functions between a Revenue Policy Division and a Revenue Management Division under the finance ministry.[5] For taxpayers the practical point is that VAT instructions, SROs and rulings continue to be issued through the existing revenue machinery while the transition runs, so the issuing authority on any document should be checked.

Authentic English text

In November 2025 the government published the authentic English text of the 2012 Act, gazetted on 13 November 2025.[1] Foreign investors and their advisers now have an official English version, though the Bangla text remains the original and later amendments are not reflected in it.

From ordinance to Act: the 2026 amending Act

Under Article 93 of the Constitution, an ordinance must be placed before Parliament and approved within thirty days of Parliament's first meeting or it lapses. After the February 2026 election, a special parliamentary committee reviewed 133 interim-government ordinances and recommended 98 for approval in their original form and 15 in amended form.[7] On 25 March 2026 the Cabinet approved the bills to convert the revenue ordinances, including the VAT amendment bill, noting that the ordinance had been used for revenue collection since 9 January 2025.[6] Parliament passed the Value Added Tax and Supplementary Duty (Amendment) Bill 2026 among 91 conversion bills by 10 April 2026.[7]

Repeal and re-enactment, not reversal

The legislative record lists the 2025 ordinance as repealed by the VAT and Supplementary Duty (Amendment) Act 2026. That wording has caused confusion. The repeal is the standard technique for converting an ordinance: the Act re-enacts the amendments and the ordinance is repealed so that the same changes do not sit in two instruments. It does not restore the pre-2025 thresholds or rates. The Cabinet presented the bill as a conversion of the ordinance into law, and the Finance Act 2026 was drafted on the footing that the Tk 30 lakh enlistment threshold continued to apply.[6] [10]

Why this matters for 2025 periods

Because the Act confirmed the ordinance, tax charged and paid under the 2025 rates between 9 January 2025 and the conversion stands on a statutory footing. Arguments that VAT collected under the ordinance was invalid because Parliament had not approved it carry little weight once Parliament has done so. Any challenge to a 2025 assessment is therefore about classification, valuation, the applicability of an SRO or procedure, not about the validity of the rate itself.

Notifications in the interim

SRO-driven change did not stop while the bills were pending. In February 2026, for example, SRO No. 51 withdrew the VAT exemption on imported LP gas and imposed VAT at 7.5%, while SRO No. 52 exempted qualifying local manufacturers from additional VAT and advance tax on imported LP gas until 30 June 2026.[8] These are the kinds of changes that never appear in the Act and are easily missed.

Finance Act 2026: VAT law changes in Bangladesh from 1 July 2026

The first budget of the elected government was enacted as the Finance Act 2026 (Act No. 96 of 2026), dated 30 June 2026 and effective from 1 July 2026.[9] Parliament passed the Finance Bill on 29 June 2026 with several amendments to the original proposals.[11] Its VAT chapter is the largest package of VAT law changes in Bangladesh of the period. Our VAT in Bangladesh guide covers each change in operational detail; the summary below focuses on what changed against the 2025 position.

Registration: the BIN becomes a gateway

The Finance Bill had proposed abolishing the enlistment threshold and linking turnover tax to annual turnover of up to Tk 5 million in the first twelve months. That proposal was not enacted, so the Tk 30 lakh enlistment threshold and the Tk 50 lakh registration threshold from 2025 continue.[10] Instead, the Act made a BIN or enlistment certificate mandatory for bank and financial institution accounts, loans, trade licence renewal, mobile financial service merchant accounts, trade association membership, utility connections and BRTA vehicle registration. Registration through the e-VAT system is now automated, with a BIN issued on submission of valid information.[10] Practical steps are in our guide to VAT registration for companies.

Returns: a quarterly default

The Act made quarterly filing the default for registered and enlisted persons, with a return due by the fifteenth day after the quarter and monthly filing optional. A proposal to require monthly advance deposits based on prior liability was dropped, so payment dates followed the return dates.[10] This was the change that lasted the shortest time; it is discussed below.

Input tax credit and the reverse charge

The definition of input was widened by removing labour from its negative list, which should reduce disputes over credits on manpower-supply services. Section 46(1) was amended so that a supply below input cost no longer forfeits the entire credit; credit is now proportionate to the output tax on that sale. Imported services remain subject to 15% reverse-charge VAT payable by the importer, with the remitting bank depositing the tax by a-challan that also serves as the tax invoice and credit document.[10] Turnover-enlisted persons now share the calendar-month tax period, and the government may notify fixed sector-specific turnover tax amounts of up to Tk 200,000, with 4% continuing until it does.[10]

Rates, exemptions and supplementary duty

Online advertising became a separate service code at 5%, with deduction at source at 5%; semiconductor assembly, testing and packaging services became taxable at 15% and joined the mandatory deduction list. Gold and silver jewellers moved from 5% ad valorem to fixed VAT per bhori: Tk 2,500 for gold, platinum and diamond, and Tk 100 for silver.[10] [11]

Supplies by startups, as defined in the Income Tax Act 2023, became exempt from 1 July 2026. A replacement master exemption SRO dated 7 June 2026 made iron ore, LP gas, tractor tyres, unworked diamonds and printer ribbon among others taxable, while computer printers, dialysis filters and chargers became exempt.[10] Supplementary duty moved in both directions: down for mattresses and some cosmetics, up for washing machines, lighters and filter rods, and new rates of 40% and 67% on nicotine pouches and heated tobacco.[10] Local double-cabin pickups and microbuses moved from 15% to 5% at passage.[11]

Penalties, audits and appeals

The penalty for irregular credit or adjustment fell from a range of 50% to 100% to a range of 30% to 50%, while new penalties target fake stamps and banderols and tampering with VAT software. Audit timetables were codified: documents within two months of notice, a possible one-month extension, and completion within a year of submission. ERP records became acceptable evidence. The appeal pre-deposit fell from 10% to 1% before the Commissioner (Appeals) and the Appellate Tribunal, and from 10% to 2% before the High Court Division. A new section 137A opened a six-month interest-relief window from 1 July 2026 for specified legacy demands, including demands under the repealed VAT Act 1991.[10] [9]

October 2026: monthly returns restored

The quarterly default lasted one quarter. On 28 September 2026 the Cabinet approved a draft VAT amendment ordinance for 2026 amending section 64 of the Act to require a return within fifteen days after the end of each tax period, instead of after every three tax periods.[12] The ordinance was gazetted on 14 October 2026. Returns are due within fifteen days of each tax period, moving to the next working day if the fifteenth is a public holiday; government, semi-government and autonomous bodies, banks, insurers and nil filers have twenty days.[13]

Why the government reversed course

VAT supplies nearly 38% of the NBR's total revenue, and collections fell about 21% year on year in the first two months of 2026-27. A member of the NBR's VAT Policy Wing explained that many businesses held VAT until the end of the quarter instead of paying monthly, and that the quarterly cycle complicated rebates, adjustments and refunds.[13] To allow the e-VAT system to be updated, the NBR extended the deadline for online returns for the July to September 2026 tax periods to 25 October 2026, without interest or penalty.[14]

The parliamentary step still to come

The October measure is an ordinance made while Parliament was not in session. Like the 2025 instruments, it must be laid before Parliament and approved within the constitutional period after Parliament next meets, failing which it ceases to have effect.[7] Businesses should file monthly now and watch for the conversion bill, which may be amended in committee. Filing practice is covered in our guide to VAT return filing.

What changed, what was reversed and what stayed

The table below sets the main VAT law changes in Bangladesh against their later history. A change marked as continuing remains the law as verified in October 2026, subject to any notification issued for a particular product or sector.

Three patterns stand out. First, the structural changes of January 2025, the lower thresholds and the higher trading-stage rate, have survived every later instrument. Second, the visible consumer-facing increases were softened by SRO, not by amending the Act. Third, the elected government's own reforms through the Finance Act 2026 have mostly eased compliance burdens, with the one high-profile exception, quarterly returns, reversed for revenue reasons within four months.

The current position as verified in October 2026

For a supply made today, the working position is as follows. The standard rate remains 15%, with reduced and fixed rates in the Third Schedule as modified by notifications.[1] A business must register for VAT when its turnover exceeds Tk 50 lakh in twelve months, and enlist for turnover tax between Tk 30 lakh and Tk 50 lakh; turnover tax remains 4% until sector amounts are notified.[10] Goods sold at the local trading stage carry 7.5% by statute, subject to sector-specific notifications such as the 2.4% for medicines.[1] [4] Returns are monthly again, due within fifteen days of each tax period.[13]

What still needs checking for each transaction

No article can tell you the current rate for a particular product or service without three further checks: the correct HS code or service code; every SRO in force on the date of supply, including conditions and expiry dates; and whether the supply falls within a deduction-at-source list. Our guide on how to calculate VAT in Bangladesh works through the arithmetic, and our note on VAT deduction at source covers withholding.

Who does what

The institutions that matter when the law moves are set out below.

Compliance implications of the 2025–2026 VAT law changes in Bangladesh

The legal changes are only half the problem. The other half is that systems, contracts and audit files built for one version of the law continue to run after it changes. These are the points where we see exposure.

Apply the law of the date of supply

Every VAT question starts with a date. A 2025 restaurant bill, a 2026 jewellery sale and an imported software subscription paid in August 2026 are each governed by a different combination of Act, schedule and SRO. When reviewing an audit or a show-cause notice, rebuild the law that applied in each tax period before arguing about the numbers. Records of which version was applied, and why, are the strongest defence.

Price contracts for change

Long-term supply, service and construction contracts signed before January 2025 often quoted VAT-inclusive prices at reduced rates that no longer exist. Whether the supplier or the customer bears the increase depends on the price clause. New contracts should state prices exclusive of VAT and supplementary duty, require the price to move with any change in law, and allocate responsibility for deduction at source.

Recheck credits against the new rules

The six-period credit window introduced from 1 July 2025 and the 2026 changes on labour and below-cost supplies may open credits that were previously refused. Equally, traders buying goods that are exempt or partly exempt at manufacture may lose credit under the 2026 value-addition rule. A credit review for 2025-26 and 2026-27 is a sensible exercise, and our guide on VAT refunds covers recovery of excess credit.

Use the cheaper appeal route and the interest window

The cut in appeal pre-deposits to 1% and 2% changes the economics of disputing an assessment, particularly for 2025 periods where classification under the new schedules is contested. The section 137A window for specified legacy demands runs for six months from 1 July 2026, so any decision to use it must be taken before the end of December 2026.[10] Our tax disputes practice handles appeals and ADR, and our note on tax audits in Bangladesh explains the audit process.

A seven-step response to any VAT law change

When a new ordinance, Finance Act or SRO is issued, the same sequence protects the position. Our tax compliance practice runs it for clients after each budget and each mid-year change.

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Common mistakes after VAT law changes in Bangladesh

• Treating the 2026 repeal as a reversal. The amending Act confirmed the 2025 thresholds and rates; it did not restore the Tk 3 crore threshold.
• Reading the Act without the SROs. The January 2025 rollback, the LP gas changes and the 2026 master exemption all live in notifications.
• Staying on quarterly returns. The October 2026 ordinance requires a return for each tax period; quarterly filing is no longer the default.
• Ignoring the BIN gateway. Banks, utilities and licensing authorities now ask for a BIN or enlistment certificate even from businesses below the registration threshold.
• Leaving ERP rates unchanged. Invoice systems set up before 2025 may still carry 5% trading-stage or reduced restaurant rates.
• Missing time limits. Credit windows, appeal periods and the section 137A window all run whether or not the business has noticed the change.

VAT law changes in Bangladesh will continue: each budget brings a Finance Act, and the conversion of the October 2026 ordinance is still to come. The businesses that cope best keep a dated log of the instruments they rely on and review it every July and whenever a new ordinance is gazetted.

Frequently asked questions

Is the VAT and Supplementary Duty (Amendment) Ordinance 2025 still in force?

No longer as an ordinance. Parliament passed the conversion bill in April 2026, converting it into an Act, and the ordinance is recorded as repealed by that Act. Its thresholds and rate changes continue as part of the Act.[6] [7]

Did the 2026 Act reverse the 2025 VAT increases?

No. The repeal was the technical step for converting the ordinance into law. The 2025 thresholds and trading-stage rate continue, and the Finance Act 2026 proceeded on that basis.[10]

What is the VAT registration threshold in Bangladesh now?

Tk 50 lakh of turnover in twelve months. Between Tk 30 lakh and Tk 50 lakh a business enlists for turnover tax instead. Both figures date from the January 2025 ordinance.[1] [10]

Are VAT returns in Bangladesh monthly or quarterly?

Monthly. The Finance Act 2026 made quarterly filing the default from July 2026, but an ordinance gazetted on 14 October 2026 restored a return for each tax period, due within 15 days, or 20 days for listed filers.[13]

What is the VAT rate on goods sold at the trading stage?

7.5% under the Third Schedule since January 2025, with lower statutory rates for medicines and petroleum products and further reductions by notification for some sectors.[1] [4]

Why do the Act and the actual rate sometimes differ?

Because exemptions and reduced rates are often granted by SRO without amending the Act. The January 2025 rollback, for example, worked through notifications, so the statutory schedule still shows higher figures.[4]

How much must be deposited to appeal a VAT demand?

Since the Finance Act 2026, 1% of the tax demanded before the Commissioner (Appeals) or the Appellate Tribunal, and 2% before the High Court Division, down from 10%.[10]

Do I need a BIN if I am below the registration threshold?

Often, yes. Since 1 July 2026 a BIN or enlistment certificate is required to operate business bank accounts, take loans, renew a trade licence, obtain utility connections and register business vehicles.[10]

Can VAT paid under the 2025 ordinance be challenged as invalid?

Validity arguments are weak now that Parliament has converted the ordinance into an Act. Disputes over 2025 periods are better framed around classification, valuation, notifications or procedure.[7]

Which VAT law changes in Bangladesh are still pending?

The October 2026 return-filing ordinance must still be approved by Parliament, and further SROs and the next Finance Act will follow. Check the gazette before relying on any rate.[7] [13]