Budget 2024-25: What can be expected?

The National Board of Revenue (NBR) has proposed a standard VAT rate of 15% for many goods and services in the upcoming fiscal year (FY) 2024-25 budget. While there is a proposal to apply this VAT rate uniformly across all products and services, the prime minister has advised a phased implementation.

This would result in a 15% VAT rate from production to the consumer level, which could increase consumer prices.

Currently, the NBR collects VAT at rates of 2, 3, 5, 7.5, 10, and 15% on various products and services. Plans are in place to phase out VAT exemptions in some sectors, moving towards a uniform VAT rate, according to Ministry of Finance sources.

Changes in mobile phone call costs

The prime minister has given a positive nod to a proposal to increase the supplementary duty on mobile phone calls to boost revenue collection. Currently, consumers can talk for minutes worth Tk73 when they recharge their mobile by Tk100, with the rest deducted as VAT and supplementary duties. If the supplementary duty is increased by 5%, consumers will be able to talk for minutes worth Tk69.35 out of Tk100.

Duty on car imports by MPs

Currently, MPs can import cars duty-free. However, the prime minister has agreed to cancel this benefit to reduce inequality. The proposed budget for FY25 includes a 25% supplementary duty and 15% VAT on car imports by MPs. Additionally, duties will be imposed on imported cars for hi-tech parks, which previously enjoyed duty-free benefits.

Baggage rules remain unchanged

Under current rules, a passenger can bring 117 grams of gold by paying a duty of Tk4,000. The NBR proposed that this be limited to once a year, but the prime minister vetoed this. The tax will be collected each time gold is brought in, even if it exceeds once a year.

Corporate tax rates

The NBR has decided to reduce corporate tax rates conditionally. The prime minister agreed to reduce taxes in non-listed industries in the productive sector from 27.5% to 25%. However, taxes in all other sectors will remain unchanged.

Tariff benefits on agricultural imports

The prime minister advised against increasing duties on the import of agricultural inputs and fertilizers, meaning the cost of importing these items will not increase.

Return assessment

To reduce taxpayer harassment and increase revenue collection, all taxpayers, both individuals and companies, will be required to submit returns through the self-assessment method in the next budget. This method avoids return assessments, which are currently required for individual taxpayers and optionally for companies. Major changes to the income tax law are expected in the next budget.

No increase in tax-free income limit

Despite rising inflation, the tax-free income limit for individuals will not increase in the upcoming budget. Last year, this limit was raised from Tk3 lakh to Tk3.5 lakh.

Increased taxes for the wealthy

To increase revenue collection, the NBR plans to impose additional taxes on the wealthy. The top tax rate for individual taxpayers is set to rise from 25% to 30% for annual incomes exceeding Tk16 lakh. There are also plans to reduce tax exemptions in various sectors and eliminate tax exemptions on capital income from stock market investments.

Revenue collection targets

The proposed budget for FY 2024-25 sets a revenue collection target of Tk4.80 lakh crore. The current budget set this target at Tk4.30 lakh crore, later revised to Tk4.10 lakh crore.