VAT on steel rods may rise by 10%
The proposed change may be included in the Finance Bill accompanying the upcoming national budget. A similar increase in the specific tax on these products was introduced in the previous budget as well
Highlights:
- NBR considering 10% higher specific tax on steel products
- Proposed VAT hike may feature in upcoming budget
- Steel industry warns tax increase could further weaken demand
- Construction slowdown has cut steel rod demand by one-third
- Producers say some products sell below production cost
- NBR says higher VAT would minimally affect steel prices
The National Board of Revenue is considering raising the specific tax – a form of value-added tax (VAT) – on mild steel (MS) products and related items by around 10% at the production stage, according to sources at the Ministry of Finance.
The proposed change may be included in the Finance Bill accompanying the upcoming national budget. A similar increase in the specific tax on these products was introduced in the previous budget as well.
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Industry stakeholders have warned that any further tax hike could dampen demand at a time when the steel sector is already struggling with weak market conditions. They said economic slowdown has reduced infrastructure and construction activities across government, private and individual projects, leading to a sharp fall in demand for steel rods.
According to sources at the NBR, the specific tax on MS products manufactured from re-rollable scrap currently stands at Tk1,700 per tonne, which may be increased by Tk170.
The specific tax on billets and ingots produced from meltable scrap may rise by Tk150 from the current Tk1,500 per tonne. For MS products manufactured from billets or ingots, the tax may increase by Tk160 per tonne. In the case of ingots or billets produced from meltable scrap and MS products manufactured from those ingots or billets, the increase may be Tk220 per tonne.
A senior NBR official, speaking to The Business Standard on condition of anonymity, said the specific tax at the local production stage for MS rods should be higher than the current rate.
"After reviewing the matter, we are preparing a proposal for a reasonable increase in VAT," the official said.
However, Md Shahidullah, managing director of Metrocem Group, believes the current economic climate is not suitable for raising VAT.
Explaining his concerns, he said demand for steel and related construction materials had fallen sharply as infrastructure development activities slowed across the country. "In some cases, we are now forced to sell products below production cost just to stay in business."
"If additional VAT is imposed on these products in such a situation, demand may decline further, which will increase pressure on us," he said.
Industry insiders said steel rod prices were selling between Tk80,000 and Tk85,000 per tonne until March this year, but prices have risen since the outbreak of the conflict in the Middle East.
Shahidullah said rod prices currently range between Tk85,000 and Tk92,000 per tonne.
NBR officials, however, argued that an increase of Tk150 to Tk200 per tonne due to higher VAT would not significantly affect prices.
According to the Bangladesh Steel Manufacturers Association (BSMA), there are around 200 steel mills operating in the country, including approximately 40 large industrial enterprises. The sector's total installed production capacity is about 120 lakh tonnes annually.
Under normal market conditions, annual demand for various steel products – including MS rods, sheets, beams, angles and plates – exceeds 60 lakh tonnes. MS rods, or rebars, account for the largest share of the market and are widely used in the construction sector.
Industry stakeholders said demand for steel rods has fallen by nearly one-third due to a slowdown in real estate and private construction activities, high interest rates and broader economic uncertainty.
