LED bulb, juice, home appliances among items brought under VAT hike

The government has increased the value-added tax (VAT) on more than 13 goods and services, including LED bulbs and tube lights, various juices, mango bars, rolling paper, security services, auction services, refrigerators, and air conditioners.

The new VAT rate would jump to 15% from 5%.

The government's fiscal policy has adversely affected their export market exploration plans, and adding a VAT increase on electric bulbs will affect both consumers and businesses, officials have said.

Conversely, increasing the VAT rate from 5% to 15% on mango bars and juice, tamarind juice, guava juice, pineapple juice, and mango bar manufacturing could limit access to nutritious products for people.

Obtaining security services from third-party companies and participating in auctions will also be costlier, with the VAT hikes proposed on both to 15% from the current 10%. 

Kamruzzaman Kamal, marketing director of PRAN-RFL Group, emphasised that no company has the capacity to absorb such production cost increases if VAT rates rise.

"These costs will have to be passed on to consumers, otherwise businesses will struggle to afford them," he added.

In FY21, the government exempted about Tk3.18 lakh crore in taxes, including Tk1.5 lakh crore from VAT and Tk1.25 lakh crore from income tax. These exemptions are categorised as tax expenditures.

As part of the $4.7 billion loan package, the IMF has stipulated conditions, including the rationalisation of tax expenditures. All types of tax exemptions are expected to be phased out by 2027 to enhance revenue realisation.