Govt moves to tax retailers at source, eyes Tk6,000cr more revenue
Under the proposed framework, dealers supplying goods to retail shops will collect the tax at the point of distribution based on the value of products sold
The government is now targeting retail shopkeepers to widen the tax net further through a new 0.20% source tax levied on goods at the supply point, aiming to generate at least Tk6,000 crore in additional revenue annually, according to officials and industry sources.
Under the proposed framework, dealers supplying goods to retail shops will collect the tax at the point of distribution based on the value of products sold.
Officials said the initiative has already received a green signal from the finance minister and may be included in the upcoming budget speech scheduled for June. The proposed measure is aimed at broadening the tax net and improving compliance within the retail sector.
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At present, companies are subject to a minimum turnover tax of 1% on annual sales, while dealers pay a 1% source tax on commissions and a 0.25% turnover tax. The new levy would operate in addition to these existing taxes and specifically target retail transactions, with collection responsibilities placed primarily on dealers and supply chain entities.
Officials from the National Board of Revenue said the tax would be collected through an automated system known as A-Challan, supported by a mobile application. Under the proposed mechanism, taxes collected at the dealer level would be deposited directly into the state treasury through digital channels, with retailers tracked using mobile numbers and periodic SMS updates.
Concerns over implementation and compliance
Speaking to TBS, business representatives and tax experts have warned that the proposed system could increase pressure on distributors and potentially push up consumer prices.
Debabrata Roy Chowdhury, director of legal and corporate affairs at Nestlé Bangladesh, said collecting taxes from retailers could create significant operational challenges and lead to harassment risks for small traders, many of whom do not have Tax Identification Numbers.
He added that it remains unclear how such tax collection would be implemented and whether distributors would be able to handle the additional administrative burden. He noted that Nestlé Bangladesh alone works with around 6 lakh retailers nationwide.
Executives from Pran-RFL Group said the company operates around 22,000 dealers nationwide, supplying products to approximately 15 lakh retailers. They warned that adding tax collection responsibilities at the distribution level could significantly increase operational costs and strain existing systems.
Kamruzzaman Kamal, director of Pran-RFL Group, said the government may be relying on distributors due to the difficulty of directly reaching retailers, but warned that this would increase pressure on the supply chain.
Experts see potential for wider tax base
Tax experts said the proposed measure could significantly expand the national tax net by capturing previously undocumented retail activity.
Snehasish Barua, an income tax expert and managing partner of SMAC Advisory Limited, said collecting tax at the wholesale-to-retail stage could help formalise transactions in the informal retail sector and improve tax compliance.
He added that better documentation of wholesale purchases would expose hidden income among small retailers and support fairer competition with tax-compliant supermarkets. He also noted that the system could improve data integration within the value-added tax framework.
According to NBR estimates, there are around 1.3 crore Tax Identification Number holders in the country, of whom only around 45 lakh file tax returns. A significant proportion of these filers reportedly declare zero taxable income. Officials estimate that tax is effectively collected from only around 15 lakh individuals nationwide.
The Bangladesh Bureau of Statistics' Household Income and Expenditure Survey 2024 estimates there are around 1.17 crore economic units in the country, although this includes both formal and informal entities.
Tax collection mechanism, rollout plan
Officials said the tax would initially be implemented through dealers supplying goods to retailers, with an estimated target of around 50 lakh retailers in the first phase, out of an estimated 1 crore nationwide.
A senior NBR official said that if a retailer sources products from multiple companies, the tax would be collected at each distribution point at a rate of Tk2 per Tk1,000 of product value.
Quarterly SMS updates would inform retailers of taxes collected on their behalf, while refunds could be claimed at year-end if excess tax is deducted, provided the retailer obtains a Tax Identification Number.
Price impact debate
Business leaders and experts warned that the tax could lead to higher consumer prices if the burden is passed along the supply chain.
They argued that retailers may incorporate the additional tax into product pricing to maintain profit margins, potentially increasing costs for consumers across fast-moving consumer goods, cement, steel, iron products, furniture, food items and pharmaceuticals.
However, NBR officials maintained that the tax burden would be minimal and would not necessarily lead to price increases, noting that adjustments and refunds would be available where applicable and that the system was designed to improve compliance rather than increase costs.
