Bangladesh waives VAT on local supplies to boost export competitiveness

Tuesday, 14 October 2025 02:38 - - {{hitsCtrl.values.hits}}

As Sri Lanka’s exporters face disruption from the removal of the Simplified VAT (SVAT) scheme here at home, competitor Bangladesh has moved in the opposite direction by waiving value-added tax (VAT) on locally sourced raw materials and services used for exports to strengthen competitiveness.

The move is also intended to prepare Bangladesh exporters for the loss of preferential trade status after its graduation from the least-developed country (LDC) category in 2026.

According to a Financial Express report, in a recent directive, Bangladesh’s National Board of Revenue (NBR) clarified that local sourcing of raw materials and services by exporters under a “Deemed-Export” provision will be eligible for VAT exemption, subject to specific documentation and regulatory conditions.

This move follows repeated appeals from Bangladeshi industry associations and exporters who argue that VAT on locally sourced inputs puts them at cost disadvantage compared to bonded-warehouse users, who enjoy duty-free import privileges.

According to the recent NBR clarification, the exemption will apply when goods and services are locally supplied for export purposes.

Bangladesh exporters will need to meet certain compliance requirements, such as conducting transactions in foreign currency and ensuring the supplies are properly documented in the Utilization Declaration (UD) or Utilization Permission (UP).

Furthermore, the exporter must operate under a bonded- or special-bonded warehouse approved by customs or another authorized body.

According to the Financial Express the clarification is intended to eliminate the issue of double taxation on export-bound products that rely on local inputs.

Also, the special fiscal measure is meant for encouraging the growth of backward-linkage industries and reducing reliance on imports.

The clarification became necessary due to widespread confusion and allegations surrounding VAT practices among Bangladesh exporters.