What conditions must be met for exporters to get VAT exemption on local purchase?
The supply must be made to the actual exporter, NBR clarifies
Exporters in Bangladesh are eligible for value-added tax (VAT) exemptions on local purchases of goods and services, but in practice, complications at the field level have often caused additional costs, delays, and even harassment. In some cases, VAT was imposed despite the exemption.
To address these issues, the National Board of Revenue (NBR) clarified on 9 October that exporters meeting certain conditions will qualify for VAT exemption, with such purchases considered as "deemed exports."
The conditions are:
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- The supply must be made to the actual exporter
- The supply must be against a local back-to-back letter of credit (LC)
- Payment must be made in foreign currency
- The exporter must maintain a bonded or special bonded warehouse
- The supply must be listed in the exporter's utility declaration (UD) or utility permission (UP)
Utility Declaration (UD) refers to a declaration of raw material entitlement submitted by exporters through their respective associations to customs authorities.
Welcoming the NBR's clarification, BGMEA Vice President Md Shehab Udduza Chowdhury told The Business Standard, "We procure various goods and services locally, which is 10% of the export value. But VAT offices often did not recognise them as 'deemed exports', leading to VAT imposition and complications. This clarification resolves a long-standing issue."
He added, "We have no issues with the specified conditions. This is a positive step by the NBR toward improving ease of doing business."
