Home ›› Economy ›› Budget FY25
The government has proposed to impose 7.5 per cent VAT on locally-manufactured air-conditioners, refrigerators and freezers to sustain the continuing growth trajectory of the domestic industries as well as increase the revenue collection.
Currently, there is no VAT on air conditioners, while refrigerators and freezers are subject to a 5 per cent VAT.
While tabling the national budget for FY2024-25 at the parliament, Finance Minister Abul Hassan Mahmood Ali, said “I propose withdrawal of full exemption and imposition of 7.5 per cent value-added tax on air conditioners at the local manufacturing stage while continuing existing facility of exemption of VAT (including Advance Tax) and supplementary duty (where applicable) on imports and local purchases of raw materials and spare parts necessary for the manufacturing of the aforesaid till June 30, 2025 as well as extension of existing VAT exemption facility for production of compressors till June 30, 2025.”
He also said, “For the production of refrigerators and freezers, I propose the imposition of 7.5 per cent VAT instead of 5 per cent at the local manufacturing stage while continuing existing facility of exemption of VAT (including Advance Tax) and supplementary duty (where applicable) on imports and local purchases of raw materials and spare parts necessary for the manufacturing of the aforesaid till June 30, 2025.”
The proposed increment in the VAT rate on refrigerators and freezers aims to generate additional revenue from domestic production.
The minister added, “Air conditioner manufacturing companies can import compressors at a concessionary rate. As air conditioners are not used by common people, I recommend withdrawing the subsidized rate on its import duty.
“Apart from this, at present compressors required for the production of refrigerators are also produced in the country. So, I propose to withdraw the concessionary rate for refrigerator compressors also.”
Furthermore, with a view to earning proper revenue, the minister proposed to impose a minimum value on the import of compressors used in refrigerators and air conditioners.
While accurate market data for AC sales is scarce, manufacturers and retailers estimate that 4,00,000 units were sold in 2023 and it increased to 6,00,000 this year. Sales have significantly grown in the past few years. Sector people claim that the market size is approximately Tk 5,000 to Tk 7,000 crore.
Chillers
Industries chillers, refrigeration systems designed to remove heat from a process or facility, are set to benefit from a significant tax reduction. Currently, importing chillers incurs a total duty of 104.68 per cent, which has been deemed excessively burdensome.
Finance Minister Hassan Mahmood Ali said the new proposal aims to waive all other taxes except for a 5 per cent Customs Duty (CD) and advance income tax on chillers with a capacity of 50 tonnes or more. This adjustment is expected to facilitate various industries that require chillers as essential capital equipment.
