The Chittagong Port Authority began imposing a 15% VAT on port services, as a consequence of the enactment of last year’s Finance Act. Credit: Shutterstock

The President of the BGMEA Faruque Hassan told Just Style exclusively that the decision to withdraw VAT on port services will “reduce operational costs” for Bangladesh businesses grappling with the current global economic headwinds.

According to multiple local reports, the National Board of Revenue (NBR) initially introduced a 15% VAT on port services for fully export-oriented industries and factories through two separate statutory regulatory orders (SROs) in 2019 and 2021.

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The Chittagong Port Authority began imposing a 15% VAT on port services, as a consequence of the enactment of last year’s Finance Act, which terminated the “zero rate of VAT” on services related to the transportation of international transport services and loading and unloading supplies from ships as of 1 July 2022, dealing a severe blow to garment exporters.

In response to mounting pressure from exporters, BGMEA president Hassan and a delegation engaged in negotiations with the NBR, for the removal of VAT on port services in October last year.

News site, RMG Bangladesh wrote that 45% of containerised goods, primarily raw materials, imported through Chittagong port were subjected to VAT, significantly escalating export costs, particularly for the garment industry.

Hassan added: “The move is a testament to the government’s commitment to supporting export-oriented industries and fostering economic growth.”

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Garment manufacturer Abul Kalam Azad told India Seatrade News the detrimental effect of the 15% VAT on port services had “lowered our competitiveness” with other global manufacturers.

“If we can make goods at low cost, we can export them at a reduced price,” he said.

Azad thanked the revenue board for “finally” lifting the VAT on port services.

Recent data shared by freight supply chain news site, The Loadstar indicated a significant decline in container and ship handling for the second consecutive year at Bangladesh’s ports and inland container depots:

  • Chittagong port handled a total of 3.05 million TEU in 2023, compared to 3.143 million in 2022,
  • The port received 4,103 ships in 2023, approximately 6% fewer than the previous year,
  • Inland container depots decreased handling 877,689 TEU of containers in 2023 compared to 983,452 TEU in 2022, representing an 11% decline.

Last week (2 January), garment factories in Bangladesh reportedly terminated the employment of hundreds of workers following protests for higher wages in October, despite global fashion brands urging the Bangladesh Government not to retaliate against participants both during and after the minimum wage review.