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NBR to reduce VAT on sweets

Industry: Consumer & Retail, Food

Officials from the finance ministry have stated that the National Board of Revenue (NBR) is contemplating a reduction in the value-added tax (VAT) on sweets, cutting it in half to 7.5 percent. This move is expected to make sweets more affordable for consumers starting from the next fiscal year, 2023-24. The decision to lower the indirect tax on sweets is driven by the NBR’s success in revenue collection from restaurants. In the current fiscal year, the NBR had already reduced VAT on food bills in most types of restaurants to 5 percent, except for three-star hotels and above, which still maintain a 10 percent VAT for AC establishments and 5 percent for non-AC ones.

A senior official from the finance ministry explained that the NBR observed increased VAT collections from restaurants after the rate reduction. Hence, they are now considering extending the VAT reduction to sweets, allowing people to purchase them with a reduced VAT. Unfortunately, there is no available data on the latest VAT collection figures, which consumers pay when purchasing goods and services. However, the NBR’s annual report for 2019-20 revealed a 26 percent year-on-year decline in VAT revenue from sweets stores, amounting to Tk 40 crore.

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