Introduction: One VAT Law, Different Rules for Every Industry
If you think VAT in Bangladesh is a one-size-fits-all system, think again. While the standard VAT rate is 15%, rules, exemptions, and compliance requirements vary significantly across industries. Whether you’re in manufacturing, retail, tech, or healthcare, understanding your sector-specific obligations isn’t optional—it’s essential.
In this post, we’ll walk you through the key industry-specific VAT rules in Bangladesh, so your business stays compliant, confident, and audit-proof.
Why Industry-Specific VAT Knowledge Matters
Each sector contributes to the economy differently, which is why the National Board of Revenue (NBR) has outlined different VAT treatment rules. Misunderstanding these can lead to:
- Overpayment or underpayment of VAT
- Ineligible input VAT claims
- Legal penalties or business disruption
Whether you’re a small startup or a growing enterprise, getting familiar with the industry nuances is a smart, strategic move.
1. Manufacturing Industry
In Bangladesh, manufacturing businesses must register for VAT if their annual turnover exceeds BDT 80 lakh. Here’s what manufacturers need to know:
- Standard VAT rate: 15% on most goods.
- Credit eligibility: VAT credit is allowed on raw material purchases.
- VAT returns: Monthly submission is mandatory.
- Use of VAT software: Registered manufacturers must use NBR-approved VAT software (VAT e-invoice system).
Example: A garments factory exporting products can claim input tax credits but must submit export documentation as proof.
2. Trading & Wholesale Business
For importers, wholesalers, and retailers:
- Turnover VAT: Smaller traders may pay turnover tax at 4% instead of standard VAT.
- Mushak-6.3: Purchase and sale vouchers must be maintained.
- Online price display: For e-commerce retailers, price must include VAT and be transparent on websites.
Note: Businesses earning under BDT 3 crore annually may qualify for a turnover tax scheme instead of regular VAT.
3. Information Technology (IT) & Software Services
This sector enjoys several benefits:
- Exemption: Locally developed software and IT-enabled services are exempt from VAT until June 2025.
- Exported services: Considered zero-rated; you may still need to file returns.
- Registration required: Even exempted businesses should register to claim input tax credits on purchases.
Common mistake: Many small IT firms skip VAT registration, missing the opportunity to formalize and scale.
4. Healthcare & Medical Sector
- VAT Exemptions: Basic medical services (e.g., hospital treatment, diagnostics) are VAT-exempt.
- Pharmaceuticals: Medicine is subject to VAT at reduced or exempted rates depending on the product.
- Medical Equipment: Importers must pay VAT unless covered by exemptions listed under SROs (Statutory Regulatory Orders).
Tip: Stay updated with SROs published by NBR, as exemption lists change frequently.
5. Education Sector
- Exemptions: Tuition fees and educational services are mostly VAT-exempt.
- Private coaching centers: Subject to 5% VAT.
- Online education: May be considered digital service and taxed differently.
Compliance tip: Clearly differentiate exempt and taxable services when filing VAT returns.
6. Real Estate & Construction
- Construction services: VAT applicable at 7.5% on total value.
- Flat/apartment sales: Standard VAT is 2%-4.5%, depending on location and size.
- Land developers: Must collect VAT from buyers and deposit it to the treasury.
Important: Keep proper documentation for every transaction — NBR audits are common in this sector.
7. Telecommunication
- VAT Rate: 15% standard, plus supplementary duty (SD) ranging from 5%-15%.
- Prepaid cards, recharge, and services: Must display VAT in invoices and maintain usage records.
Digital VAT filing: Telcos must use e-invoicing systems integrated with NBR.
8. E-Commerce & Online Businesses
- Mandatory VAT registration: For platforms with more than BDT 80 lakh annual turnover.
- Digital products: VAT at 5%-15% depending on product type.
- Cross-border services: Subject to reverse charge VAT if service is from a non-resident supplier.
Update: New rules require e-commerce businesses to issue VAT Challan via online platforms.
9. Hospitality & Food Services
- Restaurants: 7.5% VAT for non-air-conditioned; 15% for air-conditioned establishments.
- Hotels: Tiered VAT based on room rent rates.
- Service charge: If levied, VAT applies to it as well.
Reminder: Display VAT-inclusive menu pricing to comply with NBR guidelines.
10. Financial Services
- Banking and Insurance: Most services attract 15% VAT.
- Exemptions: Core banking functions (e.g., deposit collection) may be exempt.
Audit risk: Financial institutions face frequent scrutiny — ensure precise record-
.
Summary Table: VAT rules by Sector
| Industry | Standard VAT Rate | Special Rule or Exemption |
| Manufacturing | 15% | Input-output declaration (Mushak 4.3) required |
| Retail & Trading | 15% or 4% | Turnover tax available for small traders |
| IT & Software | 0% or 15% | Local software may be exempt |
| Education | 0% or 15% | Depends on type of training offered |
| Restaurants | 7.5% | Input VAT not claimable |
| Healthcare | Exempt or 15% | Cosmetic services are taxable |
| Construction/Realty | 5% | Flat sale taxable; land transfer exempt |
| Telecom/Internet | 15% or 5% | Surcharge and SD apply to mobile services |
Resources : https://nbr.gov.bd/regulations/rules/vat-rules/eng
Tips to Stay VAT Compliant in Your Industry
- Review the NBR VAT Schedules regularly (they update often)
- Maintain all Mushak forms and records applicable to your business
- Consult a VAT specialist for industry-specific audits
- Use digital accounting software for better compliance and filing
- Never assume an activity is exempt—check first, invoice second
Conclusion: Industry Knowledge = Tax Confidence
Understanding your sector’s VAT rules is no longer optional—it’s a strategic necessity. If you’re relying on generic tax advice, you might be overpaying or exposing your business to risk.
Don’t guess when it comes to tax. Get it right the first time.
Need industry-specific VAT support?
Contact our expert VAT consultants for a customized compliance strategy tailored to your business type.
FAQs About Industry-Specific VAT rules in Bangladesh
- Is VAT registration mandatory for all industries?
Only businesses with turnover above BDT 50 lakh or engaged in specific VAT-applicable activities are required to register. - Can I claim input VAT if my services are VAT-exempt?
No. If your service is exempt, you cannot claim input VAT on related purchases. - Are freelancers in Bangladesh subject to VAT?
Yes, if your income exceeds the threshold and your services are not exempt, you must register for VAT. - How often do industry VAT rates change?
The NBR may revise rates or rules annually or through special notices, so regular updates are essential. - Do eCommerce businesses have different VAT rules?
Yes. Online sellers may need to register, issue digital VAT invoices, and comply with platform-specific rules.
