Govt likely to exempt VAT on imports of 36 pesticide raw materials

The government is set to propose value-added tax (VAT) exemptions on the import of 36 raw materials used in pesticide production, aiming to boost local manufacturing, reduce reliance on finished imports and strengthen the domestic agrochemical industry.

Finance Minister Amir Khosru Mahmud Chowdhury is scheduled to unveil the national budget for the fiscal 2026-27 in the parliament today.

At present, imported raw materials for local production face a combined tax burden of 30% to 58%, including up to 15% VAT, making domestic production less competitive.

National Board of Revenue sources said a proposal is also under consideration to offer tax rebates on raw material imports for fertiliser production.

Officials also said the government is moving to support self-sufficiency in zinc sulphate fertiliser, with a proposal to reduce import duty on its key raw material, zinc ash, to zero percent.

Tax rebates are also being expanded for veterinary medicines, with plans to extend zero-duty benefits to generic categories of imported veterinary drugs instead of limiting concessions to specific branded products.

Relief for fertiliser producers 

A broader package of relief is also under consideration for fertiliser and pesticide inputs to reduce agricultural production costs. 

A proposal seeks to fully exempt the existing 7.5% VAT at the business level on all types of fertilisers. Separately, there is also a proposal to withdraw the 7.5% advance tax currently imposed at the import stage on all pesticides used in agriculture.

Cashew import duties likely to rise

In a move to support local cultivation and processing, the government is planning significant increases in cashew import duties. 

The tariff on raw cashew nuts (in shell) is proposed to rise from 1% to 25%, while duties on processed cashew nuts (shelled) may increase from 5% to 25%.

However, to support domestic processors, a special provision is likely to be introduced, allowing raw cashew imports for local processing industries at a concessional 15% duty.

Poultry, dairy machinery to get duty waiver 

The budget also proposes full duty exemptions on machinery and equipment parts used in the poultry and dairy sectors to enhance domestic production capacity. 

Several items are expected to be added to the relevant statutory regulatory order (SRO), bringing import duties on them down to zero percent.

In addition, duty concessions on raw materials for poultry, dairy and fish feed industries are set to be expanded, with three additional inputs likely to be included in the SRO and brought under zero-duty coverage.