The government is set to halve the value-added tax on locally manufactured air conditioners and refrigerators in the national budget of financial year 2026-27, a move that could lower retail prices.
According to the officials from the National Board of Revenue, the VAT at the production stage for air conditioners and refrigerators might be reduced to 7.5 per cent from the existing 15 per cent.
Finance minister Amir Khosru Mahmud Chowdhury is set to present The Bangladesh Nationalist Party-led government’s first budget on June 11 at the national parliament, with a total outlay of around Tk 9.30 lakh crore.
If approved, prices of locally manufactured refrigerators and air conditioners are expected to decline, as the reset tax rate would remain in effect until June 30, 2030.
In the current budget, the NBR doubled the VAT from 7.5 per cent to 15 per cent, framing the move as part of a gradual phasing-out of manufacturing incentives.
Currently, at least 22 industrial conglomerates operate manufacturing facilities within this sector, employing roughly one lakh nationals. The government intends to build this industry into a premier export engine alongside readymade garments, NBR officials said.
Industry stakeholders had long argued that the lower VAT rate was essential to sustaining the domestic production capacity built up over years of import substitution policy. The higher rate, they said, tilted the playing field towards importers.
Moreover, ongoing tax benefits for home appliances such as washing machines, dishwashers, geysers, blenders and juicers might be extended, helping stabilise prices, along with duties on laptop and computer components might also be reduced.
Apart from home appliances, VAT on mobile SIM card sales might be restructured from a flat Tk 300 to 15 per cent of the sale price.
The government is also considering reducing import duties on raw materials for 68 types of medicines, cutting taxes on infant food preparations, and lowering levies on cardiac stents, eye lenses, and dialysis equipment.
Advance taxes on components used to manufacture printers, flash memory drives, and digital screens would be scaled down, supported by tariff cuts across 22 distinct raw materials imported by smartphone manufacturers to 2 per cent or 1 per cent from the existing 5 per cent.
Moreover, customs duty waivers on imported solar panels, power inverters, and specialised deep-cycle batteries might be continued until 2031. Tax breaks for manufacturing eco-friendly industrial batteries would also remain intact.
The budget could replace the existing percentage-based VAT on gold jewelry sales with a lower, fixed tariff per bhari. Currently, a 5 per cent VAT on gold sales translates to about Tk 12,500 per bhari.
The government might replace this with a specific VAT of Tk 2,500 per bhari, along with a reduction of source tax to 0.5 per cent from existing 5 per cent, said the NBR officials.
Meanwhile, prices of tobacco products, including bidis and cigarettes, might increase by around 15 per cent, with cigarette prices possibly rising by Tk 1 to Tk 3 per stick.
Supplementary duty on nicotine pouches might also increase by 40 per cent, while domestically produced alcoholic beverages may face a VAT of Tk 500 per litre. Import duty on cashew nuts might rise from 5 per cent to 25 per cent to encourage local production.
Moreover, imported frozen and premium fish, imported processed foods, imported packaged foodstuffs, luxury and branded cosmetics, MS rods and structural steels, and imported industrial nicotine might face substantial VAT, customs duty, or supplementary duty in the upcoming budget.
