The government is likely rolling back several budget proposals for FY2026-27, including a package VAT on retail businesses and a mandatory TIN for opening bank accounts, while raising the personal tax-free income limit to Tk4 lakh.
The government may also abandon its plan to introduce a new package-style VAT, known as a "specific VAT," on small retail businesses. The move comes amid concerns over inadequate implementation preparedness and the risk of harassment of small traders at the field level.
The government is also considering raising the tax-free income threshold for individual taxpayers from Tk3,75,000 to Tk4 lakh for the next tax year, with the same threshold likely to remain in place for 2027-28. It may be further increased to Tk4.5 lakh for tax years 28-29 and 29-30, and Tk5 lakh for 30-31.
In addition, the proposed 15% capital gains tax on landowners in land development projects may be reduced to 5%.
TIN for new bank accounts may go
The proposal included in the Finance Bill to make a Taxpayer Identification Number (TIN) mandatory for opening bank accounts is also likely to be withdrawn. Sources involved in the budget process at the National Board of Revenue (NBR) said changes may also be made to the personal income tax slabs.
Low chance of VAT on retail businesses
Speaking to The Business Standard on condition of anonymity, a senior NBR official said, "The likelihood of implementing the proposed specific VAT at the retail level this year is low."
He said the initiative was part of a broader plan to expand the VAT net but acknowledged that the necessary groundwork has not yet been completed.
"The required preparations are still lacking. There are concerns that implementation could create confusion, lead to harassment of businesses and ultimately increase consumer prices. As a result, the proposal may not be implemented for now," he said.
"The government may conduct further studies before moving ahead with the proposal," he added.
Under the plan, businesses with annual sales or turnover below Tk50 lakh would have been required to pay a fixed monthly VAT based on their location. The NBR also planned to simplify VAT registration for such businesses and automatically deduct the tax from their bank accounts. A new regulation was expected to be issued to facilitate the scheme.
The proposed monthly VAT ranged from Tk1,000 to Tk10,000.
During the budget discussion in parliament on 24 June, Finance Minister Amir Khosru Mahmud Chowdhury said the government planned to bring 16 retail and service sectors, including grocery and cosmetics shops, under the specific tax regime in FY2026-27.
The proposed specific tax is essentially a package VAT system that had previously been in place but was later abolished.
Mustafizur Rahman, distinguished fellow at Centre for Policy Dialogue (CPD), welcomed the government's latest plans as positive steps.
"There is a need to expand the VAT base by bringing the retail sector under the VAT net. However, this should be preceded by further study to ensure that implementation does not create unnecessary complications" he told The Business Standard.
Referring to reports that the government may raise the tax-free income threshold, he said, "The proposal is reasonable. We (CPD) had recommended setting the tax-free income threshold in line with inflation."
He added, "The 5% tax on low-income taxpayers should also be retained. Otherwise, the tax burden on middle-class taxpayers will increase."
He also said the proposal to make TIN mandatory for opening bank accounts should be dropped, noting that many people do not have taxable income. "Making TIN compulsory for opening a bank account would create an unnecessary burden on them."
Meanwhile, the Bangladesh Shop Owners Association held a press conference yesterday demanding that the government withdraw the proposal.
Association leaders warned that, if implemented, the measure would expose small and micro businesses to widespread harassment by VAT officials. They also argued that it could create serious disruption in the small and medium-sized enterprise (SME) sector, ultimately undermining the government's public support.
Speaking at the press conference held at the association's office in Moghbazar, association president Md Helal Uddin and other senior leaders urged the government to reverse its decision and abandon the proposed tax regime.
Budget FY27 / NBR / vat / TIN
While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.
Copyright © 2026 THE BUSINESS STANDARD
All rights reserved.
