The National Board of Revenue (NBR) has introduced five new preconditions for availing of VAT exemptions on "deemed exports", aiming to make the process easier for local suppliers and encourage more exports.
Deemed exports refer to the supply of goods or services to export-oriented industries or export processing zones within the country.
According to the NBR notification issued in this regard on Thursday, suppliers must provide goods or services against internal back-to-back letters of credit, and all transactions must be made in foreign currency.
Exporters, meanwhile, must operate under a bonded or special bonded warehouse approved by customs authorities or another authorised body. In addition, all supplied goods or services must be properly recorded in the recipient organisation's Utilisation Declaration (UD) or Utilisation Permission (UP).
An NBR official said the move is intended to simplify operations for local suppliers and prevent double taxation along the export supply chain.
"The decision will help sectors such as garments, leather, and other manufacturing industries that rely heavily on deemed exports," the official told The Daily Star.
Md Bodruzzaman Munshi, second secretary of the VAT policy wing at the NBR, noted that the exemption itself was not new but rather a clarification of existing provisions.
"VAT exemption was always available, but there was some confusion. We have just made the rules clearer," he explained.
Mohiuddin Rubel, former director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), welcomed the clarification.
"Earlier, many non-bonded factories or suppliers were discouraged by various complications. Now they'll feel more encouraged, knowing there's no longer any hassle in selling goods to exporters," he said.
Rubel added that the change allows local suppliers to operate legally and confidently, while buyers can source without worrying about procedural hurdles.
"Previously, such concerns often pushed us to import or buy from bonded sources, which indirectly hindered exports. With this change, exports will hopefully gain new momentum," Rubel said.