NBR reduces VAT on biscuits, cakes to 7.5%
Following demands from processed food manufacturers, the National Board of Revenue (NBR) has reduced value-added tax (VAT) on biscuits and cakes by half, lowering it from 15% to 7.5%, according to an order issued today (20 February).
On 9 January, the interim government had tripled VAT on processed food, including biscuits and cakes, raising it from 5% to 15%.
Despite the new statutory regulatory order (SRO), consumers will still pay 2.5% more in VAT compared to what they paid before the January hike.
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A senior NBR official told The Business Standard that under the 5% VAT rate in the fiscal year 2023-24, the NBR collected approximately Tk300 crore from biscuits and cakes.
Based on calculations, the hike to 15% could have generated an additional Tk600 crore in revenue, the official added.
However, despite the reduction, the official expressed hope that the revenue authority will still manage to collect an additional Tk150 crore in the current fiscal year (FY25).
The official further said, "Processed food manufacturers demanded a reduction to the previous rate of VAT, as the hike would significantly impact low-income people. Considering the situation, the government made this decision."
