Written by The Banking Post
The government has moved to waive value-added tax (VAT) on local procurements by exporters, a long-awaited step aimed at boosting the country’s export competitiveness and supporting local industries ahead of Bangladesh’s graduation from the least-developed country (LDC) category in 2026.
In a recent directive, the National Board of Revenue (NBR) clarified that goods and services sourced locally by exporters under the “deemed export” provision will be eligible for VAT exemption, provided specific documentation and compliance requirements are met.
The measure comes after repeated appeals from exporters and industry associations who argued that VAT on local inputs made them less competitive than bonded-warehouse users enjoying duty-free import privileges.
An NBR official said the clarification seeks to remove “double taxation” on export-bound products using local materials, while encouraging the growth of backward-linkage industries and reducing import dependence. The move was also necessary, the official added, to address confusion and disputes over VAT practices among exporters.
According to the new circular, when a VAT-registered supplier delivers goods or services to an exporter with a bonded-warehouse licence, the transaction will be treated as a deemed export. In such cases, exporters will not be required to pay VAT, subject to proper documentation through the Utilization Declaration (UD) or Utilization Permission (UP).
Exporters must also conduct transactions in foreign currency and operate under a bonded or special-bonded warehouse approved by customs.
Industry leaders have welcomed the clarification, saying it could lower production costs, especially for non-traditional exporters and light-engineering firms that depend on domestic suppliers.
A leader of the knitwear sector said the existing bonded-warehouse requirement is “costly and outdated,” as many manufacturers now source all raw materials locally due to a strong backward-linkage industry. He suggested that exporters instead provide proof of export-earning repatriation to qualify for the VAT waiver.
Exporters believe the policy will ease compliance burdens, promote local sourcing, and help Bangladesh maintain its export growth momentum amid the gradual erosion of global trade preferences.
Officials say the decision aligns with the government’s broader strategy to diversify exports, strengthen small and medium enterprises, and enhance local value addition in the export supply chain.
