The VAT rate on your supply is 15%. It stays 15% unless your specific good or service is named in one of the schedules to the VAT and Supplementary Duty Act 2012.
That’s the whole logic. Bangladesh doesn’t work from a rate card you look yourself up on. It works from a default, and 3 schedules that carve exceptions out of it.
The rate you land on decides more than your invoice. It also decides whether you can reclaim the VAT on your own costs, and that second effect is usually larger than the first.
Whether you need to be in the system at all comes first, and that’s set out in when registration becomes compulsory. We work out rate positions for clients under indirect tax services.
Where to start
Take the exact description of what you supply, not your industry, and check it against the First Schedule before anything else. Exemption is the only outcome that removes you from the system, so rule it in or out first.
The 3 schedules that decide your rate
| Schedule | What it lists | Effect |
|---|---|---|
| First Schedule | Exempted goods and services | No VAT. No registration required for these supplies |
| Second Schedule | Goods and services at reduced rates | 1.5%, 2%, 2.4%, 4.5%, 5%, 7.5% or 10% instead of 15% |
| Third Schedule | Goods and services carrying Supplementary Duty | SD of 10% to 67%, and up to 500% in certain cases, on top of VAT |
Some products carry a fixed amount of VAT rather than a percentage. Those are prescribed individually.
Anything not appearing in a schedule is standard-rated at 15%. Most business-to-business services sit here.
Finding your rate, step by step
- Write the supply description exactly as it will appear on the invoice. Rates attach to descriptions, not to companies.
- Check the First Schedule. If your supply is listed there, it’s exempt and no VAT registration is needed for it.
- Check whether a separate government notification exempts it. This is a different outcome, covered below.
- Check the Second Schedule for a reduced rate.
- Check the Third Schedule for Supplementary Duty.
- If none of them names your supply, apply 15%.
Settle this before you issue the first invoice. Correcting a rate afterwards means correcting every invoice behind it, and the VAT you should have charged is still owed whether or not your customer paid it.
The rate decides your input credit, and that’s the bigger number
This is the part that changes commercial decisions.
| Your output rate | Input tax credit |
|---|---|
| 15% standard | Full credit |
| Zero-rated | Full credit |
| Reduced rate (1.5% to 10%) | None |
| Exempt | None |
A reduced rate reads like relief and often isn’t. Charge 5% with no credit and every taka of VAT on your inputs becomes a cost. Charge 15% with full credit and it doesn’t.
Which way that lands depends on your input-to-output ratio. A business with heavy taxable inputs can be materially worse off at 5%, and a low-input service business is usually better off. Run both before you treat a reduced rate as a win, and check the blocked categories while you’re there, in which inputs you can reclaim.
Zero-rated and exempt look alike and behave differently
Both mean no VAT on the invoice. Only one lets you recover input tax.
Zero-rated supplies carry full input credit. Export of goods and services is zero-rated, along with:
- Goods supplied locally against a warranty provided by a non-resident supplier under agreement
- Services supplied locally against a warranty provided by a non-resident supplier under agreement
- Goods and services supplied to foreign-going vessels or aircraft for repair and maintenance
- Services provided on goods physically located outside Bangladesh
- Insurance related to international transportation of goods
Exempt supplies carry no credit at all.
Exporting a service doesn’t zero-rate itself. The service has to be consumed outside Bangladesh, payment has to arrive in foreign currency, and you need documentary proof of both. Fail any of the 3 and the supply reverts to 15%.
The 2 kinds of exemption
These produce different registration outcomes and get confused constantly.
- First Schedule exemption: no VAT registration required for those supplies at all
- Exemption by government notification: full VAT registration and full compliance still apply
A company that believes a notification has taken it out of the VAT system is trading unregistered. Check which of the 2 applies to you.
Supplementary Duty sits on top, and only once
Supplementary Duty applies to Third Schedule goods and services, from 10% to 67%, reaching 500% in certain cases.
The timing differs from VAT in a way that matters for pricing. VAT is payable at each stage of supply. SD is payable only at the first stage. A distributor buying SD-paid goods doesn’t charge SD again down the chain.
When VAT is calculated on retail price instead
Tobacco and goods containing alcohol are taxed on the maximum retail price rather than the transaction value. VAT and SD on those are payable by the manufacturer at the first stage of supply only.
The NBR now has the power to notify any goods as MRP-based. If you manufacture consumer goods, this is worth watching between Finance Acts rather than at year end.
Imports carry their own rate
Imported goods attract 15% VAT as part of import duties, collected by Customs from the importer on record, unless a notification exempts them.
Imported services carry 15% reverse-charge VAT, which you pay and report as your own output VAT. Your BIN has to be in place before either works properly, and the difference between your 2 tax numbers is covered in whether you need a BIN.
What this page can’t tell you
We’d rather be direct. No article can give you the rate for your specific product, and any that claims to is either describing one item or working from an outdated SRO.
The schedules run to hundreds of line items, they’re amended by Statutory Regulatory Order between Finance Acts, and 2 products that look identical commercially can sit in different lines. What this page gives you is the structure and the order of checks. The line-item answer needs the current schedule read against your exact supply description.
4 mistakes that cost money
1. Choosing a rate by industry
Rates attach to the described supply. 2 companies in the same sector can be on different rates because their supply descriptions differ.
2. Treating a reduced rate as a saving
It removes your input credit. Model the net effect on your own cost base before assuming it helps.
3. Reading a notification exemption as being outside VAT
Only First Schedule supplies escape registration. An exemption by notification leaves the registration and filing obligations intact.
4. Assuming an export is automatically zero-rated
Consumption outside Bangladesh, payment in foreign currency, and documentary proof are all required. Without all 3, it’s a 15% supply.
Getting the rate confirmed before you invoice
We check the schedules against the exact supply description for clients before the first invoice goes out, and model the input credit position at each candidate rate so the commercial choice is made on the net number. Where a rate has been applied incorrectly for a period, we handle the correction and the exposure together.
For a rate determination on your product or service, talk to our team.
Rates and schedules reflect the VAT and Supplementary Duty Act 2012 as currently applied. Schedules are amended by Finance Act and by SRO during the year. Confirm your rate with a qualified adviser before invoicing.
Frequently asked questions
What is the standard VAT rate in Bangladesh?
15% on most goods and services. Reduced rates of 1.5%, 2%, 2.4%, 4.5%, 5%, 7.5% and 10% apply only to supplies named in the Second Schedule of the VAT Act, and some products carry a fixed amount of VAT instead of a percentage.
How do I find the VAT rate for my product in Bangladesh?
Check your exact supply description, as it will appear on the invoice, against the First Schedule for exemption, then the Second Schedule for a reduced rate, then the Third Schedule for Supplementary Duty. Anything not named in a schedule is standard-rated at 15%.
Is a reduced VAT rate better for my business in Bangladesh?
Not always. Suppliers on reduced rates cannot claim input tax credit, so the VAT on your own purchases becomes a cost you absorb. A business with heavy taxable inputs can end up worse off at 5% than it would be at 15% with full credit.
What is the difference between zero-rated and exempt VAT in Bangladesh?
Both mean no VAT appears on the invoice. Zero-rated supplies carry full input tax credit, while exempt supplies carry none at all. Exports of goods and services are zero-rated. First Schedule supplies are exempt and need no VAT registration for those supplies at all.
Is Supplementary Duty charged at every stage like VAT?
No. VAT is payable at each stage of supply, but Supplementary Duty is payable only at the first stage. SD ranges from 10% to 67%, reaching 500% in certain cases, and applies to goods and services listed in the Third Schedule of the VAT Act.
