Small Businesses Not Exempt from VAT Regulations

Economic Desk

Under pressure from the International Monetary Fund (IMF), the National Board of Revenue (NBR) issued an ordinance last Thursday increasing VAT and supplementary duties on 67 essential goods and services, including mobile calls and internet. The ordinance also reduced thresholds for turnover registration and VAT registration, bringing small and medium enterprises under the scope of VAT.

The turnover threshold for VAT registration was lowered from 5 million BDT to 3 million BDT annually, while the general VAT registration limit was reduced from 30 million BDT to 5 million BDT. This reduction could significantly increase operating costs for small businesses.

The ordinance also raised VAT on essential items like life-saving drugs, from 2.4% to 3%, likely driving up medicine prices. Other affected goods and services include LPG, sweets, biscuits, tomato sauce, fruit juice, cigarettes, soap, detergent, mobile services, and broadband internet.

VAT on services like motor vehicle workshops, printing presses, tailoring shops, and cinemas increased by 5%. Supplementary duties were also introduced on popular products such as electrolyte drinks.

Broadband internet services now face a 10% VAT, up from 5%, while supplementary duties on restaurant dining, air travel, mobile phone calls, and internet services were also increased.

Economists have described the mid-fiscal-year imposition of VAT and supplementary duties as unprecedented.