Value Added Tax (VAT) in Bangladesh is collected by the National Board of Revenue (NBR) under the VAT and Supplementary Duty Act 2012. The standard rate is 15%, applied at each stage of the supply chain — though many goods and services are exempt, zero-rated, or subject to reduced rates. Whether you are a business owner calculating your liability or a consumer trying to understand why your bill is higher than the listed price, this guide covers the essentials.
The Standard Rate and How It Is Applied
The 15% standard VAT rate applies to most goods and services supplied within Bangladesh by VAT-registered businesses. When a business charges you ৳115 for something listed at ৳100, the extra ৳15 is VAT. The business collects this and remits it to NBR after deducting any VAT already paid on their own inputs — this is the 'value added' principle that prevents tax being paid multiple times on the same goods.
Adding VAT: VAT-exclusive price × 1.15 = VAT-inclusive price Extracting VAT: VAT-inclusive price ÷ 1.15 = VAT-exclusive price VAT amount: VAT-inclusive price − (VAT-inclusive price ÷ 1.15) Example: Price before VAT = ৳800 VAT at 15% = ৳800 × 0.15 = ৳120 Total price = ৳920 Reverse example: You paid ৳920 inclusive of VAT VAT component = ৳920 − (৳920 ÷ 1.15) = ৳920 − ৳800 = ৳120
Exempt Goods and Services
A significant number of essential goods and services are exempt from VAT in Bangladesh, meaning no VAT is charged at any stage of their supply chain. Key exemptions relevant to consumers include unprocessed agricultural products, essential food items (rice, wheat, vegetables, fish), basic healthcare services, educational services, and exports.
Reduced and Truncated VAT Rates
Some sectors pay VAT at rates lower than 15%, either through reduced rates or through a truncated VAT system where only a portion of the sale value is treated as value added. Examples include certain retail sectors at 5%, some service sectors at 10%, and restaurant services at 5% (on the portion of the bill that qualifies).
For Businesses: Input VAT Credit
If your business is VAT registered, you can claim a credit (called input tax credit) for VAT you have already paid on your purchases. This prevents VAT from cascading through the supply chain. The net VAT you owe = Output VAT (collected from your customers) − Input VAT (paid on your business purchases). If input VAT exceeds output VAT, you can carry forward the credit or in some cases claim a refund.
When You See a VAT Invoice
A proper VAT invoice from a registered business in Bangladesh must show: the supplier's BIN (Business Identification Number), the description of goods or services, the VAT-exclusive value, the VAT rate and amount, and the total VAT-inclusive amount. If a business is charging VAT but cannot provide a valid VAT invoice with a BIN number, that is a problem.
Tip
If you are buying goods for export or for a VAT-registered business, always ask for a VAT invoice. You cannot claim input credit on a purchase that is documented only with a cash receipt. This is one of the most common avoidable mistakes for new VAT-registered businesses in Bangladesh.