Turnover tax hike to 1% may hurt CMSMEs: BCI on proposed budget
VAT hike on raw materials will impact industrial production costs, says the BCI president
The Bangladesh Chamber of Industries (BCI) warns that the increase in turnover tax from 0.6% to 1% in proposed budget for FY26 could harm the country's industrial sector, especially Cottage, Micro, Small, and Medium Enterprises (CMSMEs).
"We urge the government to reconsider this decision in order to protect and support these vital segments of the economy," BCI President Anwar-ul Alam Chowdhury said in a statement today (3 June).
He also stated that VAT hike on raw materials will impact industrial production costs.
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"The proposed budget heavily targets revenue collection, relying significantly on corporate and personal taxes. Despite the government's low revenue due to systemic limitations, the budget offers no clear direction or steps to broaden the tax net or increase overall revenue," Chowdhury said.
He further noted that while the budget aims to curb inflation, foster a business-friendly environment, and boost employment, achieving these goals will be challenging.
"The budget appears to strictly follow the IMF formula, which could lead to losses for industries. Businesses are already grappling with high costs, including expensive fuel, steep bank loan interest rates, and insufficient fuel supply. Despite these existing challenges, duties and taxes have even been increased for industries that are reasonably competitive," he added.
The BCI president stated that budget's gradual cut to cash incentives for export-oriented industries, including garments, is making the export sector less competitive, with no fiscal support offered in return.
"On top of this, VAT on cotton yarn and man-made fiber at the production stage has increased from Tk3 to Tk5 per kg. This surge, amidst the current fuel crisis, will likely harm domestic spinning mills, leading to losses for local textiles and increasing reliance on imported yarn," he added.
He observed that the steel industry also faces a raw material tax hike from 15% to 25%, and the cement industry sees its raw material VAT rise from 5% to 15%, which will significantly increase costs for the country's housing and construction sectors.
He noted that raising the VAT on e-commerce sales from 5% to 15% would significantly harm emerging SME entrepreneurs. He recommended reducing the VAT rate back to 5% to support the growth of this sector.
