In response to ongoing high inflation rates, the government has revealed substantial increases in Value-Added Tax (VAT) and supplementary duties for over 100 categories of goods and services, including hotels, restaurants, telecommunications, internet services, medicines, soft drinks, and cigarettes.
On Thursday, two new ordinances—the VAT and Supplementary Duty (Amendment) Ordinance 2025 and the Excise and Salt (Amendment) Ordinance 2025—were implemented to facilitate these adjustments.
The mid-year hikes, set to take effect for the 2024-25 fiscal year, are projected to drive up the prices of the affected goods and services.
For example, elevated supplementary duties on mobile phone services will result in higher calls and internet access costs. Expenses for dining out, purchasing clothing, and other services will also increase prices.
The National Board of Revenue (NBR) has provided guidelines for enforcing the new rates, which are now active.
As per NBR sources, the tax increases are intended to fulfill the requirements of the International Monetary Fund (IMF) and rationalize taxes on certain goods and services.
The interim government`s advisory council approved this proposal on January 1, with the ordinances issued after receiving consent from the Ministry of Law and the chief adviser, due to the lack of a National Parliament session.
Modifications in Supplementary Duty
Hotels and Bars: The supplementary duty on bills for venues serving alcohol has risen from 20% to 30%.
Restaurants: A similar increase applies to restaurants that provide alcohol.
Raised VAT on Goods
Items such as potato flakes, corn, machine-made biscuits, pickles, chutneys, tomato paste, and mango and banana pulp will now be subject to a VAT rate of 15%, up from 5%. Products like kitchen towels, toilet tissues, sunglasses, and branded apparel showrooms will increase VAT from 7.5% to 15%.
Raised VAT on Services
Services like electric pole manufacturing, motor vehicle repairs, film studio operations, sports event organizing, and building maintenance will experience a VAT increase from 10% to 15%.
Effect on Local Enterprises
The VAT for local businesses has increased from 5% to 7.5%, while for pharmaceuticals, it has increased from 2.4% to 3%. Nevertheless, the 2% VAT previously applied to LP gas for local businesses has been eliminated.
Adjustments to Cigarette Prices and Duties
Lower Tier: The price for 10 cigarettes has risen from Tk50 to Tk60, with supplementary duty climbing from 60% to 67%.
Medium Tier: Prices have increased from Tk70 to Tk80, with duty raised from 65.5% to 67%.
Upper Tier: Prices now range from Tk120 to Tk140, with a 67% duty.
Premium Tier: Prices have surged from Tk160 to Tk185, while the duty remains at 67%.
Furthermore, limestone and dolomite have imposed a 10% supplementary duty.
Alterations in Turnover and Excise Duties
Businesses with an annual turnover between Tk30 lakh and Tk50 lakh will now be subject to turnover tax, while those with a turnover exceeding Tk50 lakh will incur a 15% VAT.
Adjustments have also been made to excise duties on air tickets, resulting in higher fares for both domestic and international journeys.
Domestic Flights: The excise duty has been increased from Tk500 to Tk700.
Flights to SAARC Countries: This duty has been doubled to Tk1,000.
Asian Destinations: The charge has risen from Tk2,000 to Tk2,500.
European Destinations: The fee has been increased from Tk3,000 to Tk4,000.
According to the government, these modifications aim to enhance revenue collection while aligning with economic objectives. However, they are expected to inflate costs across several sectors, impacting both consumers and businesses.
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