In Bangladesh, Value Added Tax (VAT) applies to most goods and services and is administered by the National Board of Revenue (NBR). However, the VAT law allows certain goods and services to remain exempt from VAT in order to protect public interest and support key economic sectors.
Alongside the primary legislation, the NBR issues Statutory Regulatory Orders (SROs) to specify, expand or restrict VAT exemptions. These SROs allow the tax authority to adjust VAT treatment and as a result, VAT exemption in Bangladesh operates through a combination of statutory provisions and current NBR notifications.
VAT exemption means that VAT is not applicable to specific supplies when prescribed legal conditions are met. These exemptions are designed to keep essential goods affordable and to support sectors that serve social, economic or public welfare objectives. Both buyers and sellers rely on these rules to determine when VAT should or should not be charged.
How VAT Exemption Works?
VAT exemption in Bangladesh operates through two parallel rule sets. The first is the exemption list provided directly under the VAT law, which covers goods and services intended to remain VAT-free as a matter of policy. The second consists of
SROs issued by the NBR, which may introduce new exemptions, modify existing ones or impose conditions on VAT treatment.
The exemption list under the VAT law generally remains stable and provides a baseline for VAT-exempt goods and services. In contrast, SROs are more flexible and allow the NBR to respond to changes in economic conditions, pricing pressures or public needs. For this reason, relying solely on the law without reviewing the latest SROs may result in incorrect VAT treatment.
Some SROs grant full VAT exemption, while others apply only at specific stages such as import, production or supply. Certain exemptions may also be temporary. Where a new SRO is issued for a particular item or service, it replaces any previous order on the same subject. Both buyers and sellers must apply the same active rule when determining VAT liability.
Types of Goods and Services That Usually Get Exemption
]VAT exemptions in Bangladesh generally focus on goods and services that support daily life and essential social needs. Basic food items, particularly those that are raw or unprocessed, often receive VAT exemption to help maintain affordability and price stability for consumers.
The agriculture and livestock sectors also benefit from VAT relief. Inputs used in farming and animal husbandry may be exempt to reduce production costs and support food security. These measures help stabilize the supply chain and benefit both producers and end consumers.
Health-related goods and medical services commonly qualify for VAT exemption to ensure access to affordable healthcare. Similarly, education-related goods and services may be exempt so that educational costs remain manageable for students and families.
In addition, certain public and social services remain outside the scope of VAT because they are not commercial in nature. Export-oriented goods and government-approved projects may also qualify for VAT exemption under specific SROs, subject to prescribed conditions.
Role of SROs in VAT Exemption
SROs play a central role in shaping VAT exemption in Bangladesh. Through SROs, the NBR can align VAT policy with economic priorities, support specific industries and manage price pressures in the market. Each SRO clearly identifies the goods or services covered and outlines the conditions under which VAT exemption applies.
An SRO functions as an authoritative reference for VAT treatment. It determines whether VAT should be charged at import, production or supply stage for a particular item or service. Businesses must rely on the relevant SRO when preparing invoices and accounting for VAT.
Once a new SRO is issued, any earlier order on the same subject ceases to apply. This makes it essential to rely on the most recent NBR notification to avoid errors in VAT charging, reporting or compliance.
What Buyers and Sellers Should Understand
VAT exemption applies strictly according to the VAT law and the currently effective NBR orders. Both buyers and sellers are bound by the same legal framework. VAT treatment cannot be altered by private agreement, commercial practice or individual preference.
Invoices should clearly indicate whether VAT has been charged or exempted. Transparent billing allows both parties to confirm compliance with the applicable VAT rules. If there is any uncertainty, the charge can be verified against the latest NBR SRO.
Sellers must ensure that they apply the most recent VAT exemption rules when issuing invoices. Once a new SRO takes effect, previous rules become invalid. Each product or service must follow the VAT status prescribed under the active legal framework to ensure consistency and compliance.
Conclusion
VAT exemption in Bangladesh is governed by the VAT law and the official SROs issued by the National Board of Revenue. Together, these sources determine which goods and services are exempt from VAT and which are taxable. The exemption framework is designed to keep essential items such as food, healthcare, education and agricultural inputs affordable for the public.
VAT treatment applies uniformly and cannot be modified by private arrangements. The VAT law and the active NBR orders at the time of supply always determine whether VAT is applicable.
Regularly reviewing the latest SROs before billing or payment helps prevent errors and ensures correct VAT handling. Applying the correct exemption rules supports compliance, reduces disputes and promotes sound tax practices for both businesses and consumers.
