Holding tax for Bscic factories may drop to 5% in cities, 2% elsewhere
According to sources, the holding tax for factories in Bscic industrial estates may now be capped at a maximum of 5% within city corporation areas and 2% at the municipal and union parishad levels – a significant relief for small industries
Highlights:
- Government plans major holding tax cuts for Bscic estate factories
- Proposed cap: 5% in cities, 2% elsewhere
- Bscic sought full exemption; authorities rejected complete waiver
- High holding taxes disrupted licences, operations, and investment
- Law allows exemptions; Beza precedent strengthened industry demands
- Trade licence issuance no longer tied to holding tax payment
The government is set to significantly reduce the holding tax on factories located in the Bangladesh Small and Cottage Industries Corporation (Bscic) industrial estates, aiming to ease business operations after Bscic's call for a full tax waiver.
At present, city corporations, municipalities, and union parishads collect holding tax at varying rates. City corporations charge 23% on the assessed annual value of industrial and commercial properties, while municipalities levy 3-7%, and union parishads 1-7%.
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According to sources, the holding tax for factories in Bscic industrial estates may now be capped at a maximum of 5% within city corporation areas and 2% at the municipal and union parishad levels – a significant relief for small industries.
Bscic Chairman Md Saiful Islam told The Business Standard on 6 January that Bscic had formally sought a full exemption for all industrial establishments in Bscic estates. "We sent a letter to the Local Government Division requesting exemption from holding tax for industries in Bscic estates," he said.
Following the proposal, the Local Government Division held meetings on 4 December last year with city corporations, municipalities, and union parishads. While a complete waiver was not approved, officials agreed to substantially cut the tax burden.
However, the exact rates are yet to be finalised by the respective local government authorities.
A senior Bscic official, speaking on condition of anonymity, said many industrial units in Bscic estates have not been paying holding tax for years, leading to trade licence suspensions and operational difficulties. "In many areas, factories cannot renew trade licences due to disputes over holding tax, disrupting business and discouraging investment," the official said.
The official also noted that Section 24 of the Bscic Act 2023 allows for exemption of industrial units in Bscic estates from holding tax. He referenced the 2020 exemption of industrial units under Bangladesh Export Processing Zones Authority (Beza) from local taxes and fees, which prompted investors to demand similar treatment.
According to Bscic data, there are 83 industrial estates across the country – 12 within city corporation areas, 27 in municipal areas and 44 in union parishad areas. These estates contain 13,139 industrial plots, of which 11,513 have been allocated to 6,295 industrial enterprises, including 887 fully export-oriented units.
Excluding land and buildings, total investment in these enterprises stands at Tk58,000 crore. In the 2024–25 fiscal year, factories in Bscic estates produced goods worth Tk65,352 crore, with exports accounting for Tk30,947 crore. During the same period, the enterprises paid Tk4,424 crore in taxes and VAT to the government.
However, a senior official of the Local Government Division said holding tax and trade licence fees remain critical revenue sources for local authorities, who also maintain roads, street lighting, and waste management for industrial areas. "While full exemption is not feasible, Bscic industries contribute substantially to employment, production, and exports. The decision is to reduce holding tax as much as possible," the official said.
The impact of non-payment has already been felt in areas such as the tannery industrial zone under Tetuljhora Union Parishad in Hemayetpur, Savar, where trade licence renewals and new licences were blocked due to unpaid holding tax.
The Local Government Division has now instructed all city corporations, municipalities, and union parishads that payment of holding tax will no longer affect the issuance or renewal of trade licences. Any application for a trade licence must be processed in accordance with the rules.
Bscic Chairman Md Saiful Islam hoped that, with this, industries in Bscic estates should no longer face obstacles in obtaining trade licences.
