The SME Foundation has proposed a comprehensive set of tax, VAT and tariff reforms, including a unified Preferential Tax Regime, to support small and medium enterprises in the upcoming FY 2026–27 national budget.
The proposals were submitted to the National Board of Revenue during a pre-budget meeting held at NBR headquarters in Agargaon on Tuesday.
SME Foundation representatives said the proposed reforms aim to create a more supportive and competitive business environment for micro, small and medium enterprises, while also helping boost government revenue.
According to the Economic Census 2024 by the Bangladesh Bureau of Statistics, Bangladesh currently has almost 11.7 million economic units, employing about 30.6 million people.
The foundation noted that SMEs contribute around 30.4 per cent to GDP growth, while the industrial sector accounts for 37.3 per cent of the economy in constant prices in FY2024–25.
A key proposal is the introduction of a PTR for MSMEs, as there is currently no comprehensive and unified tax structure for the sector.
Existing benefits are scattered across various laws and regulations, making compliance difficult for entrepreneurs.
Under the proposed PTR, SMEs could receive partial or full tax and VAT exemptions for a certain period on raw material imports, exports, and domestic sales.
Lower tax, VAT and duty rates may also be set for several years to enhance competitiveness.
The foundation suggested enacting a separate law or statutory regulatory order to introduce the PTR framework, ensuring policy stability with limited annual revisions.
It also proposed tax exemptions for new SMEs for up to 10 years, simplified turnover-based VAT systems instead of complex monthly returns, and long-term tax incentives for green and technology-driven enterprises.
Among VAT-related proposals, the foundation recommended allowing SMEs with annual turnover up to Tk 5 crore to submit VAT returns on a half-yearly basis instead of monthly.
It also proposed exempting small manufacturers with turnover up to Tk 1 crore from VAT, and introducing a slab-based ‘fixed VAT’ system for those with turnover between Tk 1 crore and Tk 5 crore.
Other measures include reducing the audit period from five years to three years for small firms, granting VAT exemptions for supplies to 100 per cent export-oriented industries, and removing VAT on handicrafts and jute goods at the supply stage.
In the income tax segment, the foundation proposed waiving the minimum tax on turnover for new SMEs for up to 10 years.
It also recommended tax holidays for backward linkage industries in leather and garment accessories, reducing advance income tax on raw material imports from 5 per cent to 1 per cent, and lowering withholding tax rates to a unified 2 per cent.
Additionally, it called for reinstating tax exemptions on handicraft exports and raising tax-free income thresholds for small and women entrepreneurs.
To protect local industries, the foundation suggested increasing tariffs on imported finished goods, such as furniture, electrical fittings, and plastic products, that are already produced domestically.
It also recommended expanding bonded warehouse facilities to more sectors, including diversified jute products, handicrafts and fabric manufacturing, and removing bank guarantee requirements.
Other proposals include duty-free import of HPLC machines for testing jute goods, resolving HS code complexities for exports of PET bottle flakes, and imposing higher duties on imported Pangas fish fillets to protect local producers.
The SME Foundation expressed hope that the proposed measures would strengthen the overall resilience of the SME sector while ensuring a balanced and sustainable revenue system for the government.
