Budget FY27: Who stands to win and lose from tax changes

The BNP government is set to unveil a series of tax measures in the new budget for fiscal year 2026-27 today, offering incentives for green industries, digital entrepreneurs and technology manufacturers, while imposing higher taxes on tobacco products, conventional fuel-powered vehicles and selected imports.

The budget is also expected to reduce duties and taxes on essential commodities and healthcare-related products, while raising the tax-free income threshold for individuals, according to finance ministry officials familiar with the matter.

Finance Minister Amir Khosru Mahmud Chowdhury will place the Finance Bill 2026 in parliament in his first budget, setting a revenue target of Tk 604,000 crore for FY27, up from Tk 554,000 crore in the current fiscal year.

The budget is expected to outline broader tax reforms for businesses and introduce stricter compliance requirements, including measures to widen the tax net through greater use of Business Identification Numbers (BINs) and Taxpayer Identification Numbers (TINs).

As part of efforts to expand the tax base, the government may propose a 0.20 percent advance tax on the supply of goods to retailers. The amount collected would be small, at Tk 2 for every Tk 1,000 of goods supplied.

The government also plans to continue tariff rationalisation ahead of Bangladesh’s graduation from least developed country (LDC) status.

Import duty may be reduced on 69 product categories, regulatory duty withdrawn on 113 items and supplementary duty reduced or removed on nine products.

Value-added tax (VAT) has also been proposed on 20 previously exempt imported products, while customs valuation and protective measures could increase on a range of consumer and industrial goods.

RENEWABLE ENERGY, EVS AMONG BIGGEST BENEFICIARIES

Renewable energy equipment appears set to be one of the biggest beneficiaries in the new budget.

Import duty and other taxes could be waived or reduced on solar inverters, lithium-ion batteries, battery pack housing, solar photovoltaic modules, and steel and aluminium mounting structures.

The proposals would complement plans to keep solar power generation tax-free until 2035 and offer a 5 percent tax rebate to solar electricity users.

The electric vehicle (EV) ecosystem could receive similar support.

Tax concessions have been proposed for EV manufacturing, battery production, charging infrastructure, and electric buses and trucks. Advance income tax on EV registration may also be reduced significantly.

The total tax on imported electric cars valued at up to $25,000 would fall from 93 percent to 64 percent, while import duties on EV chargers and charging stations would drop from 39.75 percent to zero.

To encourage consumers to switch to cleaner vehicles, the budget may increase the tax on petrol and diesel cars with engine capacities between 1,200cc and 1,600cc to 155.88 percent from 132.36 percent.

Nearly all major duty exemptions proposed for green and manufacturing sectors, including semiconductors, batteries, computers, consumer electronics, EV components and electric buses, would remain in place until 2030 or 2031.

The aim is to give investors a longer planning horizon.

FREELANCERS, CONTENT CREATORS AND STARTUPS

Among the most notable proposals is an expansion of tax benefits for freelancers. Until now, incentives have largely been limited to IT-enabled services.

The government may propose extending those benefits to all categories of freelancing income.

Content creators would also enjoy a full income tax exemption, reflecting the growing importance of Bangladesh’s digital creator economy.

Startup ventures and technology-based businesses could receive a zero percent turnover tax and full VAT exemption on local transactions, service imports and space rental until 2035.

Small and medium-sized enterprises (SMEs) may benefit from higher tax-free income thresholds, with turnover limits rising to Tk 50 lakh for general entrepreneurs and Tk 70 lakh for women and disabled entrepreneurs.

TECHNOLOGY AND SEMICONDUCTOR PUSH

Technology manufacturers also stand to gain. Existing incentives for mobile phone, computer, consumer electronics and digital device manufacturing could be extended until 2030.

The government may propose new benefits for semiconductor design, testing and packaging, signalling an ambition to position Bangladesh in higher-value segments of the global technology supply chain.

The SIM card tax of Tk 300 per connection is likely to be scrapped entirely.

Finance ministry officials estimate the move would reduce revenue by Tk 1,200 crore in the coming fiscal year, but expect the loss to be offset by wider digital inclusion and increased mobile usage.

RELIEF FOR HOUSEHOLDS, HEALTHCARE

The budget’s most immediate impact may be felt by households.

Source tax on rice, wheat, potatoes, onions, garlic, ginger, edible oil, fish and dozens of other staples would be cut to 0.5 percent from rates of up to 5 percent.

It is the government’s most direct intervention yet to ease inflationary pressures that have strained household budgets in recent years.

In healthcare, the proposals are targeted.

The withdrawal of VAT and advance tax on imported heart stents is expected to reduce the price of each unit by up to Tk 20,000.

Kidney dialysis costs could fall by Tk 800 per session following the removal of duties on dialysis filters, while intraocular lenses used in eye surgery could become cheaper by up to Tk 5,000 each.

The pharmaceutical sector could benefit from a further series of duty reductions aimed at lowering production costs and strengthening local manufacturing capacity.

The excise duty exemption threshold on bank balances is also proposed to rise to Tk 4 lakh from Tk 3 lakh, offering some relief to small depositors.

PROTECTION FOR LOCAL INDUSTRY CREATES LOSERS

The new budget may seek to provide greater protection for domestic industries through higher duties and other measures on imported products that compete with local manufacturers.

One key proposal is to increase import duty on raw and processed cashew nuts to 25 percent from the current 1 percent and 5 percent, respectively, with the aim of encouraging local cultivation and processing.

Higher protective measures are also expected on imports of ceramic tiles, sanitary ware, wash basins, cotton and rayon fabrics, PVC-coated textile products, curtain fabrics, cosmetics, foam products, honey and betel nuts.

Tobacco consumers are also likely to face a heavier tax burden.

Taxes and duties on cigarettes and other tobacco products are set to increase, pushing up retail prices.

Imported cigarettes and nicotine-related products may face additional levies as part of efforts to discourage tobacco consumption while boosting government revenue.

Importers of fossil fuel-powered vehicles could emerge as another affected group.

While the budget is expected to offer extensive incentives for electric vehicles, batteries and charging infrastructure, conventional petrol and diesel vehicles are unlikely to receive similar support, signalling a shift towards cleaner transport.

Towfiqul Islam Khan, additional director (Research) at Centre for Policy Dialogue (CPD), said the budget reflects an attempt to balance several politically important and fiscally demanding priorities at a time when revenue mobilisation remains the government’s biggest constraint.

He said persistent pressure on the operating budget continues to limit fiscal flexibility, while the need to finance electoral commitments further narrows room for discretionary spending.

According to him, although the budget signals an intention to stimulate private investment and provide some relief to consumers, these competing objectives also expose underlying tensions in the government’s fiscal strategy.

Khan added that the real test of the budget would not be the measures announced, but the government’s ability to strengthen tax governance, improve the efficiency of public spending and advance long-delayed reforms in public financial management.