Bangladesh targets global trade alignment with sweeping tariff changes

Infograph: TBS

As Bangladesh prepares to graduate from Least Developed Country (LDC) status in 2026, the government is planning significant structural reforms in the FY2025–26 budget. These reforms aim to streamline its tariff regime, curbing overprotection of local industries and aligning trade practices with global standards.

According to National Board of Revenue (NBR) sources, supplementary and regulatory duties, currently ranging from 20% to 40%, may be reduced or removed on nearly 500 tariff lines. This includes less common products such as fish, animal-based items, and certain intermediate raw materials.

In line with World Trade Organisation (WTO) regulations, tariffs and minimum values (government-set benchmark prices to prevent revenue loss) are being removed on approximately 40 types of products. Additionally, import duties on raw materials for 59 types of medicines, including those used in cancer treatment, may be withdrawn, sources told The Business Standard.

However, in a strategic move, existing import duties on steel raw materials are being withdrawn and replaced with a combined increase in VAT and Advance Income Tax (AIT), resulting in an effective tax hike of over 40%.

Furthermore, as part of phasing out protectionist support for local industries, import duties on raw materials for 14 types of industries may rise, potentially doubling. Similarly, minimum values for 21 products, including cosmetics and door locks, could also double. The minimum value refers to the benchmark price set by the government for customs purposes, regardless of the declared import price, which helps curb revenue losses from false declarations.

Bangladesh currently imports around 7,500 types of products, classified as tariff lines based on Harmonised System (HS) codes. A large portion of these products are subject to very high import tariffs, and over a hundred have government-set tariff values and minimum values, both of which have faced extensive criticism from economists. They argue that as Bangladesh graduates from LDC status, it must move away from such tariff structures, which do not fully comply with WTO global trade standards. Moreover, local industries in Bangladesh currently enjoy unusually high levels of tariff protection, often referred to as "tariff walls," inconsistent with global norms.

According to the NBR, the average import tariff in Bangladesh stands at 28%, which is less than half the average for LDCs. A senior NBR official, speaking on condition of anonymity, told TBS, "The next budget may see the largest-ever proposal to reduce Supplementary Duty (SD) and Regulatory Duty (RD) across the highest number of tariff lines in the past three years." However, he added that since the import volume of many of these items is low, the reduction is not expected to cause a significant drop in revenue. He also noted that the upcoming budget may propose reducing protection for some local industries while providing rationalised protection for others.

Duty adjustments: Increases and decreases

Increased duties:

Import duties on raw materials for 14 local manufacturing sectors — such as beverages, energy-saving bulbs, water purifiers, fans, cigarette paper, and food processing — are likely to increase sharply, with some rates potentially tripling. Affected items include malt extract and flour-based food preparations for infants and young children, imported in bulk by the food industry. Nutritional supplements for pregnant and breastfeeding women may also face higher duties.

Beverage concentrates could see customs duty increase from 10% to 15%. Soya protein-based foods and cigarette paper used in the tobacco industry may face a 100% supplementary duty, up from 60%. Similar hikes are expected for woven fabrics used in satin ribbon production. Raw materials like non-alloyed aluminium sheets for fan production, components for water purifiers, and LED bulbs and open-cell panels used in television manufacturing are also on the list. Duties on LED lamps may rise from 15% to 25%, while commercial imports of cigarette paper could face a steep 350% duty.

The government may also raise the minimum customs value on items like lipsticks, eye makeup, manicure products, face powders, cosmetics, facewash, toys, and various types of locks, meaning importers would pay more tax regardless of the declared price.

Other items facing new or higher duties include tobacco seeds (25%), soybean meal (5%), and kaolin clay (used in paper production). Supplementary duty on granite and marble could rise from 20% to 45%. For the cement industry, the fixed duty on clinker imports may be replaced with a 25% ad valorem duty, boosting government revenue. Medical equipment imported by referral hospitals may face higher duties, increasing from 1% to 10%. The government also plans to withdraw reduced tax benefits on computer accessories imports, impacting tech sector costs. These changes are part of a broader tariff rationalisation plan ahead of Bangladesh's LDC graduation, aiming to reduce overprotection of local industries and align trade practices with global standards.

Reduced duties:

To help stabilise market prices, the government may reduce the import duty on refined sugar from Tk4,500 to Tk4,000 per tonne. Supplementary duty on microbus imports may be lowered from 20% to 10%.

The duty on crude fuel oil could drop from 5% to 1%, while other fuel imports may see a cut from 10% to 3%. However, fuel duties will now be calculated based on invoice value instead of tariff value. Import duties might also be reduced on key raw materials and machinery for local industries such as tyre, tube, brake shoe, brake pad, marble, and granite production. The import tax on English, Kashmiri, and Coconut Willow wood — the main raw materials for cricket bats — may fall from 37% to 26%.

To support domestic industries, the government may propose cutting duties on raw materials for soybean meal, paper, and certain chemicals used in the leather industry, bringing some rates down from 5% to 1%. There could also be proposals to withdraw the 3% regulatory duty on imported butter and offer duty relief on neutralised soybean oil. Japanese seafood imports like scallops may see duties reduced from 15% to 5%. Eco-friendly product inputs, such as areca leaves, may face a lowered duty rate of 5%. Supplementary duty on non-alcoholic juice imports may be cut from 150% to 100%. Lastly, the budget may propose reducing the duty on raw materials like phenolic resin and sandpaper material for the local writing paper industry from 10% to 5%.