Rising tax burden threatens survival of Bangladesh's formal ice cream makers

Bangladesh's ice cream industry, which has grown threefold over the past six years into a Tk3,500 crore market, is warning that rising tax burdens and production costs are threatening the survival of formal manufacturers despite investing billions of taka.

Manufacturers say higher taxes, coupled with soaring raw material prices and weakening consumer spending, have squeezed profit margins, leaving several companies in financial distress. 

Infograph: TBS

They argue that formal businesses are bearing an increasingly heavy tax burden while competing against a large number of informal makers that largely remain outside the tax net.

The Bangladesh Ice Cream Manufacturers' Owners Association recently urged the finance ministry to withdraw the proposed 5% supplementary duty on ice cream, saying the measure would further strain an industry already grappling with rising costs.

According to the association, around 70% of the country's ice cream market is controlled by small, largely informal producers that often do not pay VAT or fully comply with food safety standards.

"Our members pay VAT, import duties and regulatory costs, while many informal producers operate at much lower expenses and sell at cheaper prices," said association president Niaz Ahmed. "This uneven tax structure discourages investment, weakens compliant businesses and ultimately reduces government revenue."

Tax burden compounds rising costs

Industry leaders estimate that production costs have increased by 35-40% over the past two years due to higher global commodity prices, currency depreciation, increased import duties and the supplementary duty introduced in 2024.

Ice cream manufacturers rely heavily on imported ingredients, including milk powder, dairy cream, condensed milk, vegetable fat, cocoa products, flavouring agents and packaging materials sourced from countries such as New Zealand, Australia, Denmark, Spain, Malaysia and China.

According to industry estimates, many of these inputs face import duties ranging from 37% to 127%.

Manufacturers also point to high taxes on commercial freezers, which result in import duties exceeding 100%. They say the equipment is essential for maintaining the cold chain from factories to retail outlets and should be treated as industrial machinery rather than luxury goods.

It may be mentioned that in September 2025, India reduced the tax on ice cream from 18% to 5% as part of efforts to encourage the organised sector and curb the sale of unhygienic, unregulated products.

Major brands feel pressure

The association claims that four of the country's seven major formal ice cream manufacturers have become financially distressed, with some struggling to open letters of credit for importing machinery and raw materials.

The formal manufacturers include Igloo, Polar, Bellissimo, Lovello, Kwality, Bloop Ice Cream and Savoy.  

Even established brands say growth has stalled.

Kamrul Hasan, chief executive officer of Igloo, said the company's sales have remained largely flat over the past two years.

"Global raw material prices have increased by 15-20%, while local taxes and operating costs have risen sharply. At the same time, inflation has weakened consumers' purchasing power," he said.

Kamrul called for separate harmonised system codes for ice cream machinery and raw materials, along with lower import duties to improve the industry's competitiveness.

Shah Masud Imam, chief operating officer of Polar Ice Cream, said ice cream should not be treated as a luxury product.

"It is fundamentally a dairy product with nutritional value. Given the high cost of maintaining food safety standards, the supplementary duty should be reconsidered," he said.

Industry seeks policy changes

Manufacturers are calling on the government to withdraw the supplementary duty, reduce import taxes on key raw materials and commercial freezers, and strengthen enforcement against informal producers. 

They argue that such measures would help restore a level playing field, encourage further investment and protect an industry that supports tens of thousands of jobs and generates substantial tax revenue.

The sector also faces structural challenges, including seasonal demand, high cold-chain costs, transport bottlenecks, and power disruptions, all of which increase operating expenses.

With consumer spending under pressure and costs continuing to rise, industry leaders say their immediate priority is no longer expanding the market but keeping factories operational under an increasingly heavy tax burden.