Businesses with turnover up to Tk2cr exempt from tax

Businesses and professionals with annual turnover of up to Tk 2 crore will no longer have to pay turnover tax, according to a new notification issued by the National Board of Revenue (NBR).

The tax authority issued the notification on Monday, reversing a decision in the current fiscal year’s budget to impose a 1% turnover tax on such businesses. The rate had previously been 0.60%.

Turnover tax is levied on sales or income generated from business or professional activities regardless of whether the entity makes a profit or incurs a loss.

The NBR introduced the system partly to prevent businesses from avoiding corporate tax by reporting losses. However, the measure has also faced criticism as an unfair tax burden on businesses that genuinely operate at a loss.

Under the new notification, businesses and companies with annual turnover between Tk 2 crore and Tk 4 crore will pay a 0.5% turnover tax on the amount exceeding Tk 2 crore.

Those with turnover above Tk 4 crore will continue to pay the existing 1% minimum tax.

The move is expected to benefit small and medium-sized businesses.

The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) had earlier urged the government to gradually phase out the 1% minimum turnover tax. The Dhaka Chamber of Commerce and Industry had also written to the NBR seeking a similar measure.

For industrial enterprises, the existing provision allowing a reduced turnover tax rate of 0.2% for the first three years after commercial production begins will remain in place.

Higher turnover tax rates applicable to certain sectors will also remain unchanged. Manufacturers of cigarettes, bidis and tobacco products are subject to a 3% rate, carbonated beverage and sweet manufacturers to 2.5%, and mobile phone operators to 1.5%. The 1% rate had applied to most other businesses under the budget, but that provision has now been revised.