VAT in Bangladesh is an indirect tax charged on taxable goods, services, and imports. The standard VAT rate is 15%. However, reduced, zero-rated, and exempt benefits may apply to certain goods and services. This guide explains the latest VAT rules for FY 2026–27, including VAT compliance.
| Compliance Pillar | Statutory Limit / Rate | NBR Mandated Form / Law | Critical Business Action |
|---|---|---|---|
| VAT Registration (BIN) | Annual Turnover > BDT 5 Million (50 Lakh) | Section 4, VAT & SD Act 2012 | Mandatory online BIN enlistment before operations. Immediate for Import/Export. |
| Turnover Tax Slab | Turnover BDT 3M to BDT 5M (30-50 Lakh) | Fixed turnover tax amount | Enlistment required. No Input Tax Credit (Rebate) allowed. |
| Standard Taxation | Flat 15% VAT Rate | Section 15, VAT & SD Act 2012 | Fully eligible for Input Tax Credit (Rebate) on purchases. |
| High-Value Sales | Single Transaction > BDT 200,000 | Mushak 6.10 Form | Must report separately to NBR if individual sale/purchase crosses BDT 2 Lakh (excluding VAT amount). |
| B2B Supply Invoice | Mandatory at delivery point | Mushak 6.3 Challan | Must be issued for all taxable commercial sales to transfer tax liability. |
| Monthly Return Filing | By the 15th day of the next month | Mushak 9.1 Form | Mandatory monthly submission. BDT 10,000 for non-submission of the return and BDT 2,000 for each month of default for late filing. |
Beyond the figures and requirements shown in the table, businesses should keep the following key VAT considerations in mind for financial year 2026–27.
- 15% is the standard VAT rate, but reduced, zero-rated and exempt treatments apply to certain supplies
- Net VAT payable is determined by deducting eligible Input Tax Credit from output VAT.
- BIN registration requires different information depending on the business structure, such as a sole proprietorship or private limited company.
- VAT-registered businesses must submit the applicable VAT return within the prescribed deadline and follow the relevant filing requirements.
- Proper accounting and record-keeping can help businesses reduce VAT calculation and reporting errors.
What is VAT in Bangladesh? (Definition & Meaning)
VAT, or Value Added Tax in Bangladesh, is an indirect tax or consumption tax that the government charges on taxable goods, services, and imports. VAT was first introduced in Bangladesh in 1991 and is currently governed by the Value Added Tax and Supplementary Duty Act, 2012.
In Bangladesh, any goods or services not listed in the Third Schedule’s reduced- or fixed-rate tables are taxed at 15%. However, some goods and services may have reduced rates (such as 5%, 7.5%, or 10%), fixed specific amounts, or exemptions.
Here, customers are the ones who pay VAT, and the businesses collect and pay the applicable VAT to the government. VAT applies to taxable supplies and imports at the stages specified under the law.
What Is VAT Rate in Bangladesh? (Latest Structure for FY 2025-2026)
Currently, the VAT rates in Bangladesh are the standard rate, reduced rate, zero rate, and exempted rate. We have attached the VAT Rate Chart of Bangladesh for FY2026-2027.
Standard VAT Rate (15%) & Input Tax Credit (ITC)
The Value Added Tax and Supplementary Duty Act, 2012 says that the standard VAT rate in Bangladesh is 15% for taxable imports and taxable supplies unless otherwise provided by law. The standard rate remains 15% for FY 2026–27.
Standard VAT Rate (15%) & Input Tax Credit (ITC)
The FY 2026–27 budget introduces several VAT concessions for specific products, industries and production inputs. These include reduced VAT rates of 5%, 7.5% and 10% for selected manufacturing, trading and service activities.
| Product or sector | FY 2026–27 rate/treatment |
|---|---|
| Manufacturing, trading and services. | 5%, 7.5% and 10% VAT |
| Air conditioners and refrigerators | 7.5% VAT |
| Gold and platinum | Fixed BDT 2,500 per bhori, replacing previous 5% VAT |
| Medicine and pesticides raw materials and some manufacturing materials | VAT and import-stage taxes will be reduced or removed |
| Pesticide raw materials | 0% VAT for 36 specified raw materials |
VAT Exemptions & Zero-Rated Supplies for Exports
VAT exemptions mean some goods and services are legally freed from charging or paying standard VAT. In Bangladesh, the government applies VAT exemption to keep essential items affordable.
In contrast, zero-rated supplies work differently. They stay within the VAT system, but the rate is set at 0%. That means you don’t charge VAT on sales. But you can still claim input VAT credit.
| Feature | VAT Exempt | Zero-Rated Supply |
|---|---|---|
| VAT Rate | No VAT applied | 0% VAT applied |
| Input Tax Credit | Not allowed | Allowed |
| Example | Basic food, health services, and education | Export of goods/services and temporary imports |
| Business Impact | Increases the cost of goods | Encourages exports by removing the tax burden |
For FY 2026–27, the government also proposed complete exemption from VAT and advance tax at the import stage for all fertilisers and pesticides used in agriculture. It also proposed exempting the 5% VAT at the business stage on fertilisers and the 5% advance tax on pesticides at the import stage. In addition, VAT on 36 specified pesticide raw materials was proposed to be reduced to 0%.
Turnover Tax vs VAT in Bangladesh: Key Differences
Turnover tax is a simplified tax system for small businesses in Bangladesh. Here, you pay tax based on your total annual sales, not on value addition like VAT.
In FY 2026–27, the turnover tax system has been overhauled. The 4% turnover tax is replaced by a fixed amount set by the NBR, which is capped at BDT 200,000. Now the turnover ceiling is BDT 5 million or BDT 50 lakh. Businesses under the system must submit quarterly returns instead of half-yearly returns.
Here’s the difference between the turnover tax and VAT.
| Aspect | VAT (Bangladesh) | Turnover Tax (Bangladesh) |
|---|---|---|
| Tax Type | Value-added tax on each stage | Fixed tax on total turnover |
| Standard Rate | 15% | Fixed NBR-set amount, capped at BDT 200,000 |
| Applicability | Medium to large businesses | Businesses with turnover up to BDT 5 million (BDT 50 lakh) |
| Input Tax Credit | Allowed | Not allowed |
| Complexity | High | Low |
| Filing | Monthly VAT return | Quarterly return |
| Pricing Impact | Tax is added at each stage | Tax is based on total turnover |
Supplementary Duty (SD): When is it Applicable?
Supplementary Duty (SD) is an extra tax applied to goods and services generally intended for luxury or to discourage consumption. For instance, high-end cars, tobacco, alcohol, and premium services. Unlike VAT, which is charged at multiple stages, SD is applied only once at a specific point. It’s usually levied at the manufacturing or import stage. However, SD can also apply when certain NBR-specified services are rendered. It includes telecommunication and premium hospitality services.
For FY 2026–27, the government proposed continuing the existing 13-tier SD structure, with rates ranging from 10% to 500%. It also proposed reducing or withdrawing SD on selected products.
| Category | VAT Rate |
|---|---|
| Standard | 15% |
| Export (Zero‑Rated) | 0% |
| Selected Services (Reduced) | 5%, 7.5% or 10%, where applicable |
| Turnover Tax | Fixed NBR-set amount (subject to applicable turnover-tax rules) |
| VAT Exempt | 0% |
| Luxury/Harmful (With SD) | VAT + applicable Supplementary Duty |
Who Needs Mandatory VAT Registration (BIN) in Bangladesh?
To register for VAT in Bangladesh, your business must meet certain turnover limits or fall under the NBR-specified categories.
Turnover Threshold & Criteria (BDT 5 Million Limit)
For FY 2026–27, the VAT registration threshold is BDT 5 million (BDT 50 lakh) in annual turnover. Businesses reaching this threshold must register for VAT and obtain a Business Identification Number (BIN) from the NBR.
Businesses below this threshold may fall under the applicable turnover-tax or exemption rules, depending on their annual turnover and business activities.
Mandatory Registration for Import-Export & Corporate Entities
Businesses engaged in import or export activities need to obtain VAT registration and a Business Identification Number (BIN), regardless of their turnover. VAT registration is also mandatory for businesses that supply, manufacture, or import goods or services subject to Supplementary Duty. Foreign entities operating a branch office, liaison office or project office in Bangladesh are also required to register for VAT. Moreover, if the businesses participate in government or other tenders, VAT registration is mandatory for them.
Voluntary VAT Registration Pros & Cons
Under section 8 of the Value Added Tax and Supplementary Duty Act, 2012, a person making taxable supplies who is not otherwise required to register may apply for VAT registration voluntarily. The VAT Rules then impose specific obligations on a voluntarily registered person.
Here are the pros and cons of voluntary registration.
Pros
- A voluntarily registered business may claim eligible input tax credit, subject to the conditions of the VAT law.
- Registration can be useful when a business mainly supplies VAT-registered customers who can claim eligible input tax credit.
- Voluntary registration provides the business with a VAT registration certificate containing a Business Identification Number (BIN).
- A person who is not required to register can apply voluntarily when making taxable supplies from an economic activity.
Cons
- After voluntary registration, the business becomes liable to pay VAT on its taxable supplies under the applicable VAT provisions.
A person voluntarily registered under Section 8 must remain registered for at least one year before applying for cancellation because registration is no longer required.
Voluntary registration brings applicable VAT return, invoicing, record-keeping, and other compliance requirements.
How Does the VAT Mechanism Work in Bangladesh?
In Bangladesh, VAT works through a chain system where tax is applied at each stage of buying and selling. But only on the value added. 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 15%. So you have to pay 200 taka as VAT on your purchased items. The reason why it is called input VAT is that 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. To calculate the actual VAT payable, businesses use a simple method.
Input Tax Credit (ITC) in Bangladesh
Input Tax Credit (ITC) allows a VAT-registered business to reduce the VAT it owes on its sales by the eligible VAT it has already paid on business purchases. To support an input tax credit claim when submitting the VAT return, the registered person must keep the required supporting documents.
For imported goods, this includes the Goods Declaration bearing the importer’s name, address and Business Identification Number (BIN). For local purchases, the registered person must keep the tax invoice issued by the supplier.
Businesses must generally claim input tax credit in the tax period in which the input is purchased or imported or within the following six tax periods, subject to the conditions of the VAT law.
How to Calculate VAT in Bangladesh?
In Bangladesh, VAT is calculated based on the value added at each stage of supply through the output VAT and eligible input tax credit mechanism.
Let’s assume a manufacturing company purchases raw materials worth BDT 10,000 and pays an Input VAT of BDT 1,500 (validated via Mushak 6.3).
After production, the company sells the final goods to a corporate client for BDT 15,000 and collects an Output VAT of BDT 2,250.
During the monthly return filing, the net VAT payable to the NBR will be:
Net VAT = BDT 2,250 (Output) – BDT 1,500 (Input) = BDT 750
Inclusive VAT Formula [When a price already includes VAT]
VAT = Price × (15/115) [as VAT rate is 15%]
For the BDT 15,000 selling price, if the price is VAT-inclusive, then
VAT = BDT 15,000 × (15/115)
= BDT 1,957 (Rounded off to the nearest integer as per NBR guidelines)
Exclusive VAT Formula [When the price does not include VAT]
VAT = Net Price × VAT Rate
For the BDT 15,000 selling price, if the price is VAT-exclusive, then
VAT = BDT 15,000 × 15%
= BDT 2,250
Total Price = Net Price + VAT amount
= BDT 15,000 + BDT 2,250
= BDT 17,250
Net VAT Payable (with input credit)
Net VAT Payable = Output VAT − Eligible Input Tax Credit (Rebate)
= BDT 2,250 − BDT 1,500
= BDT 750
You can claim the VAT already paid on the purchase as input credit. So you pay VAT only on the extra value added when selling.
Understanding VAT Deducted at Source (VDS) for B2B Businesses
VAT Deducted at Source (VDS) is the system under VAT law in Bangladesh where designated entities deduct the applicable VAT from the payment made to the supplier and deposit the deducted amount directly with the NBR. Even after VDS is deducted the supplier must report the transaction in their monthly Mushak 9.1 return and use Form Mushak 6.6 to claim a decreasing adjustment.
In a B2B transaction, this means the buyer deducts the applicable VDS from the supplier’s payment and deposits it with the NBR. On the other hand, the supplier receives the remaining amount.
VDS does not apply to every B2B transaction. It applies to specific types of supplies and transactions covered by the current VAT rules.
Required Documents for Online VAT Registration (BIN)
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 Articles of Association
- Photos of business premises
- Contact information
- Company’s financial statements
- Partnership agreement (if required)
Monthly Return Submission Requirements
Businesses must submit a VAT return for each tax period using Mushak-9.1 by the 15th day of the month following the relevant tax period. Online submission is available through NBR’s VAT system. Businesses should keep the records and supporting documents needed to prepare and support the information reported in the return.
Documents for SMEs & Sole Proprietorships
Here are the documents that SMEs and sole proprietorships may require.
- TIN
- Business or proprietor’s name
- Registered business address
- Phone number and email address
- Business ownership type
- Business activity details
- Branch details, if applicable
- Other business information required in Mushak-2.1
Documents for Private Limited Companies & Enterprises
Check it out below.
- e-TIN
- Company name
- Registered office and business address
- Company ownership type
- Business activity details
- Contact details
- Banking information, where applicable
- Branch details, if applicable
- Information about the company’s directors or responsible persons, where required by the form
⚠️Important NBR Alert: According to the latest NBR directive on 1 August 2026, all businesses must update and transition to their newly designated Business Identification Numbers (BINs) by November 30, 2026, due to the recent VAT Commissionerate restructuring. Failure to update will result in automatic deactivation in the customs ASYCUDA World system.
VAT Return Filing Process & Forms (Monthly Compliance)
You must fill out a form for a VAT return in Bangladesh. You can also return VAT online at the NBR portal or at the local office.
How to Submit Form Mushak-9.1.1 (Monthly VAT Return):
From 1 July 2026, registered VAT taxpayers use Mushak-9.1.1 for submitting the VAT return under the updated return framework.
The return can be submitted through NBR’s online VAT system, with the taxpayer required to report the relevant VAT transactions and calculate the VAT payable for the tax period.
Purchase and Sales Information
Businesses must update Form Mushak 6.1 (purchase records) and Form Mushak 6.2 (sales records) daily or on a real-time basis at the close of business, instead of waiting until the end of the month. They must also provide the required information with their VAT return as prescribed by the NBR.
Deadlines, Late Filing Fees, and NBR Penalties
Return deadline: Businesses need to submit the monthly VAT return generally by the 15th day of the month following the relevant tax period.
Late filing penalty: Failure to submit the VAT return within the prescribed time can result in a fixed penalty of BDT 2,000.
The penalty amount is for a delayed tax return, not a VAT return.
Interest on unpaid VAT: If the VAT due is not paid on time, 2% interest per month is charged on the unpaid amount until it is paid
What Are NBR Mushak Forms?
Mushak forms are the VAT records and documents prescribed by the NBR for recording business transactions, issuing VAT invoices, and submitting VAT returns.
Mushak 6.1: Purchase Register
Mushak 6.1 is used to record a business’s purchases and the related VAT information.
Mushak 6.2: Sales Register
Mushak 6.2 is used to record a business’s sales and the related VAT information.
Mushak 6.3: VAT Challan or Tax Invoice (must be issued at the time of delivery)
Mushak 6.3 is the official VAT tax invoice issued for taxable supplies. Every VAT register supplied need to issue it at the time of supply of taxable services or goods.
Mushak 9.1: Monthly VAT Return Form
Mushak 9.1.1 is the updated VAT return form introduced by the NBR from 1 July 2026 for submitting the VAT return for the relevant tax period. Manufacturers, service providers, and traders availing Input Tax Credit (ITC) will continue to file returns using Mushak 9.1. All other VAT-registered persons must file using Mushak 9.1.1.
VAT on Different Business Sectors
In Bangladesh, different businesses pay VAT at different rates. Knowing how VAT applies to your sector helps avoid mistakes.
VAT on Services
Most services in Bangladesh attract 15% VAT, though some categories like construction or transport may have lower rates. Reduced rates or VDS apply. Depending on service type. Businesses must follow NBR service codes for accurate compliance.
VAT on Imports & E-commerce
Goods brought into Bangladesh are subject to 15% import VAT. This is calculated on the customs value, including duties. Registered importers can claim this VAT as an input credit.
Online sales of goods or digital services within Bangladesh carry 15% VAT unless exempted. E-commerce businesses must register and report VAT accurately. Digital service providers, like internet or ITES platforms, may have 5% reduced VAT.
VAT on Software & IT Freelancers (Exempted Rules)
ITES and Software Production/Sales: A reduced VAT rate of 5% applies to software sales and IT services in the local market.
IT Exports and Freelancing: Qualifying IT exports and freelancing services are treated as Zero-Rated (0% VAT) or fully Exempted under the VAT law, provided the export proceeds are received through official banking channels.
VAT on Restaurants
Restaurants typically pay 5% VAT, while hotels and catering services pay 10–15% depending on category. VDS rules may also apply. This ensures tax compliance while supporting smaller businesses.
Common VAT Compliance Mistakes Made by Bangladeshi Businesses
It’s seen that businesses make simple VAT mistakes that cost them time and money. Here are a few common ones and how to avoid them:
- Wrong VAT Calculation: Businesses often mix up prices that already include VAT. So, always check whether VAT is included before calculating.
- Not Filing Returns: Some businesses even skip or delay filing VAT returns. Ensure you file it on time to keep you safe from fines.
- Incorrect Invoices: Missing required VAT details on an invoice can cause compliance problems. Always make sure your invoices follow NBR rules.
- No Documentation: Not keeping receipts or contracts can block input tax claims. Keep all invoices and receipts organized for easy reference. Plus, regularly reconcile your bank transactions with your issued Mushak 6.3 and total turnover reported in Mushak 9.1 to prevent NBR tax-evasion allegations.
Conclusion
VAT in Bangladesh is not always daunting. You just need eligible accounting software. It will not only manage your business income and expenses but also VAT operations. Make sure your business follows the applicable VAT rules and return filing requirements. Keep in mind that the standard VAT rate is 15%, but reduced, zero-rated, or exempt treatments may apply to certain goods and services. Lastly, maintain proper records and claim eligible input tax credits to avoid unnecessary VAT costs and compliance problems.
FAQs About VAT in Bangladesh
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.
