Steel, rod to get costlier as govt mulls tax hike

Steel products are likely to become more expensive in the next fiscal year, as the government plans to raise Advance Income Tax (AIT) and VAT by over 40% at the import and production stages — 20–23% at import and 20% at production — while scrapping the existing fixed import tariffs. This move could push up consumer rod prices by around Tk1,400 per tonne, according to sources at the National Board of Revenue (NBR).

At present, the government collects a fixed import duty of Tk1,500 per tonne on imported steel scrap and Tk2,200 per tonne in VAT on billet and rod production, totalling Tk3,700. If the proposed hikes take effect, this could rise to Tk5,000 or more per tonne.

A senior NBR official, on condition of anonymity, told TBS, "Currently, rods are being sold at around Tk90,000 per tonne. The NBR collects Tk3,500 to Tk3,700 per tonne in revenue, which is significantly lower than the expected Tk5,000, based on a 15% VAT rate."

"We believe the government is missing out on its fair share of revenue from this sector. That's why we are considering an increase in taxes," he added.

However, industry insiders argue that instead of increasing taxes, the government should consider a cut, as any hike under current conditions could be "disastrous" for the steel sector.

Sk Masadul Alam Masud, founding president of the Bangladesh Steel Mills Association, told TBS, "Due to a slowdown in development projects and taka devaluation, steel and rod prices have soared, causing nearly a 30% demand drop. If taxes are raised significantly, it would be disastrous for the sector."

"Such a sharp increase in VAT and AIT would drive up prices further, reducing consumer purchasing power. As a result, demand in the individual, private, and housing sectors would decline, putting the entire industry under renewed threat," he added.

Echoing similar concerns, Tapan Sengupta, deputy managing director of Bangladesh Steel Re-Rolling Mills Limited (BSRM), one of the country's leading steel producers, said, "The construction sector is already going through a difficult time. A blanket increase in taxes would raise consumer costs by more than Tk1,000 per tonne."

According to industry insiders, per capita steel consumption in Bangladesh remains low compared to neighbouring countries, including India. However, with continued economic growth, demand is expected to rise steadily.

Currently, per capita steel consumption in Bangladesh is around 55 kg, and it is projected to reach 95 kg by 2030. In comparison, per capita consumption stands at 93.4 kg in India, 432.5 kg in Japan, and 266.3 kg in the United States.

According to Bashundhara Multi Steel Industries Ltd (BMSIL), Bangladesh's steel production increased by approximately 64% between 2018 and 2023, reaching 90 lakh tonnes.