The standard rate of VAT in Bangladesh is 15%. It is applicable on the goods and services that consumers will buy. Almost every business must register for VAT. If their turnover is more than 50 lakhs, they must pay the standard rate of VAT to the government. Or else, penalties will be issued. For any businesses, it’s important to know how VAT works, how to register for VAT, how to claim VAT return, and so on.
What is VAT in Bangladesh?
VAT or Value Added Tax in Bangladesh is one of its principal taxes, just like custom duties, income tax, corporation tax, etc. It’s also known as consumption tax or indirect tax, charged on commodities and services. Here, customers are the ones who pay VAT. Also, it is imposed on each stage of import, production, distribution, or trading. So, three types of VAT are seen here. They are:
- Gross National Product (GNP) type
- Consumption type
- Income type
The National Board of Revenue (NBR) makes the registration of VAT and submission of VAT return possible. In Bangladesh, it is mandatory for businesses to pay 15% VAT if their annual sales are over BDT 8 million.
Anyway, this 15% VAT is included on produced, rendered, and imported goods mainly. For example, a good’s purchase price is 1000 taka and its sales price is 1500 taka. Here, the VAT is, (1000×15/115) = 130.43 taka.
How VAT works (input VAT vs output VAT)
Businesses that are operating in VAT registered regions, must incorporate the concept of VAT. Input VAT and output VAT are the crucial parts here.
Input VAT or input tax is the VAT that a company pays for buying its goods or services. For example, you own a coffee shop. To make coffee and other items, you have to buy coffee powder, milk, sugar, etc. Those ingredients cost 1000 taka and the VAT on them is 20%. So you have to pay 200 taka as VAT on your purchased items. The reason why it is called input VAT is because you are paying VAT on the inputs, i.e. the goods or services that you will provide.
On the other hand, output VAT or output tax is charged by the tax registered business on its customers. In short, the business charges VAT on its sales. Then it has to return the VAT amount to the government.
The purpose of both input tax and output tax is to increase revenue of the internal government. So, they can raise funds for the development of economic growth. Now, VAT has become the largest source of revenue for the government, i.e. 56%.
Current VAT Rates in Bangladesh (as of 2025)
Currently, the VAT rates in Bangladesh are standard rate, reduced rate, zero rate, and exempted rate.
Standard VAT rate (15%)
The VAT purview 1991 says that the standard VAT rate in Bangladesh is 15%. It’s applicable for most goods and services.
Reduced VAT rates
The reduced VAT rate is charged on some particular products and services. These rates are 2%, 4%, 5%, 6%, 9%, 10%, etc, depending on the category.
Zero-rated and exempt
Zero rated VAT means the goods and services that have 0% VAT. It’s common with essentials, like children’s clothing, food, etc. If the business wants, it can reclaim its VAT paid on the purchased goods just to reduce its cost.
VAT exempt, on the other hand, is goods and services that are not subjected to VAT. It also applies to essential items, like education, healthcare, etc. But here, the business cannot reclaim the VAT that it paid on its purchased goods.
In short, input credit is allowed in zero-rated VAT, but not VAT exempt.
Who Needs to Register for VAT?
In order to register for VAT, you must meet the following factors mentioned here.
Criteria for mandatory VAT registration
Businesses that have a turnover of more than 50 lakhs, are entitled to pay 15% VAT. And if the business’s turnover is more than 30 lakhs and less than 50 lakhs, it has to pay 3% turnover tax.
Types of businesses that must register
Businesses that have less than 30 lakhs annual turnover, are not required to register VAT. But if it’s more than that, then they have to register for VAT. Manufacturers, importers, and exporters, fall into this category. E-commerce platforms and large service providers, like telecom and banks, should also register VAT.
Difference between BIN (Business Identification Number) and TIN
You will need BIN (Business Identification Number) and TIN (Taxpayer Identification Number) to register VAT. You will need BIN for your VAT payment. And TIN is used for income tax payment.
How to Register for VAT in Bangladesh?
To register for VAT, you must meet some criterias and have necessary documents. Also, maintain the timeframe of registration.
Step-by-step registration process via NBR (National Board of Revenue)
Make sure you have all the required documents for the registration process. Just go with the following steps:
- Visit the NBR website www.vat.gov.bd, create an account with your email and password, and log in.
- Now, go to the VAT registration section and fill in all the information. Like, business name, address, ownership, business transaction details, and business activities types.
- Upload all the required documents.
- Submit your application and wait for approval.
Required documents for registration
These are the documents that you must have for VAT registration.
- National ID or passport
- Trade license
- Business Identification Number (BIN)
- Taxpayer Identification Number (TIN)
- Bank account details
- Business address proof
- Proof of business activities
- VAT application form
- Authorization letter
- Company seal
- Memorandum of Association and Article of Association
- Photos of business premises
- Contact information
- Company’s financial statements
- Partnership agreement (if required)
Timeframe and fees
On an average, VST registration can take 7 days. And for some reasons, it can even take 15 days. You won’t have to pay any fees to register VAT for your business.
Online VAT registration through VAT Online System (VOS)
VAT Online System (VOS) is NBR’s official website. Here, you can register VAT, file returns, and communicate.
VAT Return Filing Process
You must fill a form for VAT return. You can also do it online at the NBR portal or at the local office.
Monthly return submission requirements
You have to submit the VAT returns monthly. For that, you need:
- Information of sales or service collection.
- Certification details and BIN (Business Identification Number).
- Details on income and expenses.
- Ownership information.
Form VAT-9.1 and other relevant forms
Form Mushak 9.1 is mandatory for monthly VAT return. Other than that, you will need purchase and sales records, tax invoices, and credit notes.
Deadline for VAT return submission
Generally, the deadline for VAT return submission is within 15 days of the following month.
Penalties for late or incorrect filings
In case if you miss the deadline of VAT return filing or do an incorrect filling, you have to face penalties. Before, the penalty was 10,000 BDT. But now it is 5000 BDT after Finance Minister AHM Mutsfa Kamal proposed it on June 9, 2022.
VAT Payment Methods
There are several tax portals and banking systems for VAT payment. Meanwhile, you must know the calculation of VAT payable and keep track of it.
How to calculate VAT payable
First, you have to determine the VAT rate, which is 15% in Bangladesh. Well, some goods and services can have different VAT rates. Then calculate the output VAT, i.e. Output VAT= Sales price × VAT rate.
Now, calculate the input VAT, i.e. Input VAT= Purchase price × VAT rate. And net VAT payable= Output VAT – Input VAT.
If by any chance the input VAT exceeds the output VAT, the excess will be carried forward or refunded to you by tax authorities.
Modes of payment (online, bank, mobile financial services)
You can pay VAT online, bank, and mobile financial services (MFS). To pay online, you can choose gateways, like aamarPay or NBR Sonali Bank Tax Portal. Internet banking is also applicable for VAT payment. Then, NFS providers, like bKash, Nagad, OK Wallet, Upay, etc, facilitate VAT payment.
Keeping track of payments for audit purposes
Here are some things you must keep a record of.
- Your purchase price and selling price, even if they have reduced, zero-rated, or exempt VAT.
- All issued and received invoices.
- Name, address, and VAT number of suppliers who prepared the invoice.
- Debit notes and credit notes.
Well, for digital VAT payment, you have to keep record of:
- VAT on goods and services of the supplies you made and received.
- Time and value of the supply that you buy and sell. VAT should be excluded here.
- Adjustments, if you make them in return.
- Your sales and sales VAT.
- VAT accounting schemes (if you use).
- Items on which you can reclaim VAT.
Remember to keep digital records of the transactions made by your business too. Such as, expenses in petty cash, third-party business, and volunteers for charity.
Input Tax Credit (ITC) in Bangladesh
Input tax credit is like a tax incentive to certain taxpayers. They can deduct the amount of VAT that they have accrued from the VAT collected from sales.
Businesses can claim input tax credit while paying the output tax. Also, the person must have the registration under GST. Then, he must have the tax invoice and supplies provided by the supplier.
Remember, ITC (input tax credit) is applicable on the goods bought for business purpose, not for personal use. The tax invoice or debit note should be the evidence of the purchase he made. The supplier will file it in form GSTR-1 which will be shown on buyer’s Form GSTR- 2B. And the buyer will take it to the GSTR- 3B.
He has to pay for the goods within 180 days from the date mentioned in the invoice. Or else, he has to pay interest along with the ITC claims.
Common Challenges in VAT Compliance
In VAT compliance, you may face some challenges. Such as:
- Manual errors in tax filing, especially in calculations.
- Maintaining VAT-related documents for a long time.
- Adapting to changes in VAT laws can be hard for most manufacturers.
- Frequent inspections and audits by tax authorities.
How Accounting Software Like Financfy Can Help in VAT
Automated accounting software like Financfy can help a lot in maintaining VAT records and calculations of businesses.
- Financfy easily automates the calculation and reports of VAT
- Can generate monthly VAT return reports
- Keeps digital records required for audits
- Integrates with NBR’s online system (if applicable)
- Reduces the chance of human error in tax compliance
Conclusion
VAT in Bangladesh is not always daunting. You just need an eligible accounting software. It will not only manage your business income and expenses, but also VAT operations. All you need is to abide by the VAT regulations of Bangladesh. Don’t forget to register for VAT, and must pay 15% VAT on the consumer goods that are the rights of the government.
Lastly, be aware while filling the procedures of VAT so that your business can benefit from the input tax credit. That’s all!
FAQs About VAT in Bangladesh
1. Is VAT registration mandatory for freelancers or digital service providers?
Freelancers or digital service providers, with more than 3,00,000 BDT annual income, have to pay tax. From 3,00,001 to 6,00,000 BDT the tax rate is 10%, from 6,00,001 to 12,00,000 BDT the tax rate is 15%, from 12,00,001 to 30,00,000 BDT the tax rate is 20%, and above 30,00,000 the tax rate is 25%.
2. What happens if I don't register for VAT when I’m supposed to?
If you don’t register for VAT when you should, you have to pay a penalty, that is 100% of the invoice shown. Or maybe your business can be suspended.
3. Can I register for VAT voluntarily if my turnover is below the threshold?
Yes, you can register for VAT even if your turnover is below the threshold.
4. How do I cancel or update my VAT registration?
To cancel or update your VAT registration, you have to inform the authority first. Then clear the outstanding liabilities, submit necessary documents, receive VAT officer’s verification, and receive the VAT registration cancellation certificate. Lastly, return the VAT certificate and update the records. Remember to apply for the cancellation before the Commissioner in VAT- 2.4 Form.
5. Can small businesses avoid VAT registration?
If small businesses don’t have a turnover more than 30 lakhs, they can avoid VAT registration.
6. What’s the difference between VAT and sales tax?
In sales tax, the consumer needs to pay the full amount to the government at the point of sales. But with VAT, different consumers pay the portion of the tax followed by a transaction.
