Bangladesh has one headline VAT rate, but in practice the rate you charge depends on what you sell, how you sell it, and sometimes where in the supply chain you sit. A consultancy, a restaurant, a construction contractor and a furniture showroom can all apply different rates.
This guide sets out the VAT rates in Bangladesh by sector and product type for FY 2026–27 (July 2026 to June 2027), including the changes introduced by the Finance Act 2026.
How VAT Works in Bangladesh
VAT is governed by the Value Added Tax and Supplementary Duty Act 2012 and administered by the National Board of Revenue (NBR). The system has five types of treatment:
- Standard rate (15%): applies to most goods and services.
- Reduced or truncated rates: 1.5%, 2%, 2.4%, 4.5%, 5%, 7.5% and 10% for specified goods and services.
- Fixed (specific) VAT: a set taka amount per unit for certain products.
- Zero rate (0%): exports and certain related supplies.
- Exempt: goods and services listed in the First Schedule or notified by the government.
Anything not specifically listed at a reduced rate, fixed amount or exemption is taxed at 15%.
The trade-off with reduced rates matters: suppliers charging a reduced rate generally cannot claim input tax credit (ITC). Only suppliers charging the full 15%, or making zero-rated supplies, can offset VAT paid on their purchases.
VAT Rates by Sector: Quick Reference Table
| Sector / supply | Typical VAT treatment |
|---|---|
|
Most goods and services
|
15% |
|
Consultancy and supervisory firms
|
15% |
|
Audit and accounting firms
|
15% |
|
Legal advisors
|
15% |
|
Security services
|
15% |
|
Manpower service providers
|
15% |
|
Courier and express mail
|
15% |
|
Advertising agencies
|
15% |
|
Online advertisement
|
5% |
|
IT-enabled services (ITES)
|
5% |
|
Air-conditioned hotels
|
15% |
|
Non-air-conditioned hotels
|
10% |
|
Restaurants (general)
|
5% |
|
Restaurants in 3-star+ hotels or with liquor bars
|
15% |
|
Construction contractors
|
10% |
|
Procurement providers (suppliers)
|
10% |
|
Motor vehicle garages and workshops
|
10% |
|
Land development organisations
|
2% |
|
Building construction (up to 1,600 sq ft)
|
2% |
|
Building construction (above 1,600 sq ft)
|
4.5% |
|
Furniture (manufacturing and showroom stage) |
7.5% |
|
Transport of petroleum products
|
5% |
|
Imported goods
|
15% at import stage
|
|
Imported services
|
15% reverse charge
|
|
Exports of goods and services
|
o%
|
These rates reflect published guidance as of July 2026. Several rates depend on conditions such as documentation, so always check the current Third Schedule and relevant SROs before invoicing.
Standard Rate: 15%
The 15% standard rate is the default for both goods and services. It covers most professional services, including consultancy, legal, audit and accounting, engineering, architecture, and graphic design. It also applies to manpower supply, security services, event management, vehicle rental, courier services and most manufacturing.
For foreign companies setting up in Bangladesh, this is the rate you will most likely apply if you provide B2B professional or technical services.
Reduced and Truncated Rates by Sector
Hospitality and food service
General restaurants pay VAT at 5%. Restaurants inside three-star or higher hotels, or those with liquor bars, pay the full 15%. Non-air-conditioned hotels pay 10%, while air-conditioned hotels pay 15%.
Construction and real estate
Construction contractors charge 10%. Land development organisations pay 2%. Building construction organisations pay 2% for units up to 1,600 square feet and 4.5% for larger units.
Trading and procurement
Suppliers who are not manufacturers, known as procurement providers, generally charge 10%. A trader charging 7.5% to a VAT-withholding entity is also treated as a procurement provider for withholding purposes. Traders charging 15% with a proper tax invoice (Mushak 6.3) are not.
Furniture
Furniture attracts 7.5% at both the manufacturing and showroom stages. At the showroom stage, the reduced rate depends on having evidence that VAT was paid at the manufacturing stage. Without it, 15% applies.
Digital and IT services
IT-enabled services are taxed at 5%. The Finance Act 2026 created a separate category for online advertisement, also at 5%. Parliament cut this rate from the 15% originally proposed in the budget.
Automotive and repair
Motor vehicle garages and workshops charge 10%.
Fixed VAT on Specific Products
Some goods carry a fixed taka amount rather than a percentage. Under the Finance Act 2026:
- Gold, platinum and diamond jewellery: the previous 5% VAT has been replaced with a fixed Tk 2,500 per bhori.
- Silver jewellery: fixed at Tk 100 per bhori.
- Steel and scrap: fixed VAT amounts on scrap and certain steel products were increased.
- Locally produced foreign liquor: Tk 500 per litre.
- Unprocessed tobacco supplied from a processing unit: Tk 50 per kg.
Manufacturing Concessions and Exemptions (Valid to June 2030)
The FY 2026–27 budget extended or introduced several VAT concessions to support local manufacturing:
| Product | VAT treatment |
|---|---|
|
Mobile phone manufacturing and assembly
|
Exempt until 30 June 2030
|
|
Computers and technology-based goods
|
Exempt until 30 June 2030
|
|
Electric cookers, induction cookers, water purifiers, water heaters
|
Newly exempt until 30 June 2030
|
|
Refrigerators, freezers, air conditioners, compressors
|
VAT above 7.5% exempt (effective 7.5%) until 30 June 2030
|
|
Electric vehicle manufacturing and assembly
|
100% exempt or VAT above 5% exempt, depending on conditions, until 30 June 2030
|
Other notable exemptions include all supplies made by registered startups and services provided by freelancers and content creators.
Some items have moved the other way. LPG imports, iron ore, unworked diamonds and certain telecom equipment are no longer exempt.
Imports and Exports
Imported goods are subject to 15% VAT at the import stage, collected by Customs along with customs duty and other import taxes, unless an exemption applies.
Imported services are subject to 15% reverse-charge VAT. The Bangladeshi importer accounts for it as output VAT. When payment is remitted abroad, the bank deposits the VAT, and the treasury challan serves as the tax invoice. If the service is an eligible input, the importer can claim it as input tax credit.
Exports of goods and services are zero-rated, so no VAT is charged, and exporters can recover input VAT.
Supplementary Duty: The Extra Layer
Some goods and services also carry Supplementary Duty (SD), generally ranging from 10% to 67%, and up to 500% in certain cases. SD mainly targets luxury and demerit goods such as tobacco, alcohol, cosmetics and certain imported products. Unlike VAT, SD is charged only at the first stage of supply.
Registration Thresholds and Turnover Tax
The rate you charge also depends on whether you are VAT-registered:
- Annual turnover above Tk 5 million: VAT registration is mandatory.
- Annual turnover between Tk 3 million and Tk 5 million: turnover tax enlistment, with turnover tax of 4%.
- Specified activities: VAT registration is mandatory regardless of turnover, including importers, exporters, tender suppliers, and branch or liaison offices of foreign companies.
Registration is fully online through the e-VAT system, and a Business Identification Number (BIN) is now required for bank accounts, trade licence renewals and utility connections.
Filing and Compliance in FY 2026–27
From FY 2026–27, quarterly VAT returns are the default, due within 15 days of the end of each quarter. Businesses can opt for monthly returns, due by the last day of the following month. All returns must be filed online.
Limited companies, banks, NGOs and other designated entities must also deduct VAT at source (VDS) when paying suppliers. This means your customer may withhold part or all of the VAT on your invoice and deposit it directly.
Frequently Asked Questions
What is the standard VAT rate in Bangladesh?
What are the reduced VAT rates in Bangladesh?
Can I claim input tax credit on reduced-rate supplies?
Is VAT charged on exports from Bangladesh?
Do foreign companies pay VAT on services imported into Bangladesh?
Get Your VAT Rate Right From Day One
Applying the wrong VAT rate can mean overcharging customers, losing input tax credit, or facing penalties and interest during an audit. With rates varying by sector, product, documentation and supply stage, it pays to confirm your position before you start invoicing.
AccouSource helps local and international businesses with VAT registration, rate classification, return filing and ongoing compliance in Bangladesh. [Contact our team] to review your VAT position.
