Tax relief on ACs, medicines, infant food, gold likely in budget

Highlights:

• AC and fridge VAT may drop from 15% to 7.5%
• Medicine raw materials may get import duty exemptions
• Semiconductor tax concessions may be extended to 2031
• Infant food import duty may be reduced 15% to 10%
• Gold VAT may be replaced with fixed Tk2,500 per bhori
• Prices of dates spices, pesticides and crop protection chemicals may decline
• Steel, tobacco products may face higher VAT rates

As part of broader efforts to support domestic industries and ease the tax burden on consumers, the government may reduce VAT rates, extend tax concessions and adjust import duties across several sectors in the upcoming budget, according to National Board of Revenue (NBR) sources.

Under the proposals, VAT at the production stage for air conditioners and refrigerators may be reduced from 15% to 7.5%, with the concession potentially extended until 2030.

Import duty exemptions may also be granted on raw materials used in the production of 68 types of medicines. In addition, reduced import tax benefits for raw materials used in the emerging semiconductor industry may be extended until 2031.

On the revenue side, VAT on mobile SIM card sales may be shifted from a fixed Tk300 to 15% of the sale price.

The import duty on raw materials used in infant food preparation may be reduced from 15% to 10%, which could lower the price of infant formula in the local market. The government may also withdraw the existing 5% regulatory duty on date imports, potentially easing consumer prices.

VAT at the import stage may be removed on more than 30 raw materials used in pesticide and crop protection chemical manufacturing. The duty on zinc ash, the main raw material for zinc sulphate fertiliser, may also be fully withdrawn.

A senior NBR official involved in budget preparation told TBS that the government is seeking to ease the tax burden on marginal taxpayers while also extending tax, VAT and duty concessions up to 2030, and in some cases up to 2035, to encourage investment and employment.

The official added that livestock, poultry and fish products may be included in the list of goods under a reduced source tax of 0.5%, expanding the coverage beyond the current 27 agricultural and food items. These additional 33 products currently face source taxes ranging from 1% to 5%, and the change could help reduce consumer prices.

Locally manufactured AC, refrigerator prices may decline

In last year's budget, the reduced VAT regime for refrigerator and air-conditioner manufacturing was withdrawn and replaced with a 15% VAT rate.

Industry stakeholders say the sectors had long benefited from tax incentives aimed at reducing import dependence, which helped build local manufacturing capacity.

Although the VAT was doubled to 15% in the FY26 budget as part of a gradual withdrawal of incentives, manufacturers are allowed to claim input tax rebates under the higher rate — a facility not available under the 7.5% regime, making the effective burden lower than the nominal rate.

However, NBR officials said imports of refrigerators and air conditioners have risen compared to domestic sales following the VAT increase. One official said imports grew by more than 10% in a year and could rise further if current conditions persist.

He added that the government is considering extending the incentive for another four years, with an announcement likely in the budget scheduled for 11 June.

If approved, prices of locally manufactured refrigerators and air conditioners may decline.

Gold, mobile phones, healthcare items may get cheaper

Gold and gold jewellery are also among products that may see price reductions.

Currently, a 5% VAT on gold sales translates to about Tk12,500 per bhori. The government may replace this with a specific VAT of Tk2,500 per bhori. Source tax on gold jewellery sales may also be reduced from 5% to 0.5%.

If global gold prices remain stable, retail prices in Bangladesh could fall.

Advance income tax on imports of 22 categories of raw materials used in local mobile phone manufacturing may be reduced from 5% to 2% or 1%, potentially lowering handset prices.

Tax benefits for appliances such as washing machines, dishwashers, geysers, blenders and juicers may be extended, helping stabilise prices. Duties on laptop and computer components may also be reduced.

Healthcare-related imports, including cardiac stents, eye lenses and kidney dialysis equipment, may see lower VAT and taxes, potentially reducing treatment costs.

Other products likely to benefit from tax reductions include float glass, lipstick, locally produced edible oil, solar equipment, electric vehicles, EV charging systems, packaging materials, imported fabrics for domestic use, live fish and animals, and key raw materials for pharmaceuticals and semiconductor industries.

Items that may become more expensive

Some products may see higher taxes.

Prices of tobacco products, including bidis and cigarettes, may increase by around 15%, with cigarette prices possibly rising by Tk1 to Tk3 per stick.

Supplementary duty on nicotine pouches may increase by 40%, while domestically produced alcoholic beverages may face a VAT of Tk500 per litre.

VAT on steel products, including rods, may rise from Tk150 to Tk350.

Import duty on cashew nuts may rise from 5% to 25% to encourage local production.