VAT Rates by Sector in Bangladesh 2026-27 — Restaurants, Rent, Online and Facebook Business, Construction, Software — and VAT Deducted at Source
The standard rate is 15%, but almost nobody pays only that: restaurants are at 5%, construction at 7.5%, IT services at 5%, online ads at a new 5%, and a long list of services has VAT deducted by the customer before the invoice is paid. Here are the rates businesses ask us about, and the deduction rules that go with them.
- Standard VAT is 15%; exports are zero-rated; reduced rates of 1.5%, 2%, 2.4%, 4.5%, 5%, 7.5% and 10% apply to listed goods and services under the Third Schedule.
- Restaurants 5% (15% in three-star-plus hotels and venues with bars); commercial rent 15%, paid by the tenant via e-challan; construction firms 7.5%; ITES 5%; online marketplaces and online advertising 5%; consultancy, legal and audit 15%.
- Government bodies, banks, NGOs, limited companies, education institutions and anyone with turnover above Tk 10 crore must deduct VAT at source on listed services and issue Mushak 6.6.
- Freelancers and content creators are exempt; registered startups are exempt to 2035; foreign platforms' services are taxed by 15% reverse charge at the bank.
In this guide: Rates by sector, 2026-27 · Facebook, Google and other foreign platforms · VAT deducted at source (VDS): who, what, how much · Reading your own invoices
The short answer
Section 15 of the VAT and SD Act 2012 sets the standard rate at 15% of the value of a taxable supply, with exports at 0%. The Third Schedule then lists goods and services taxed at reduced rates or fixed amounts — the reason a restaurant bill says 5% and a construction invoice 7.5% — and the VDS Rules tell certain customers to withhold the VAT and pay it over themselves. For 2026-27 the rates were reset by the Finance Act 2026 (Act 96 of 2026) and the June 2026 SROs; the online-advertising rate was cut from a proposed 15% to 5% in the passed Bill. The table below is the one we keep on the wall; where a rate comes only from secondary sources we say so, because the Third Schedule text itself is not yet available to us in machine-readable form.
Rates by sector, 2026-27
| Sector / service (service code) | VAT rate | Notes |
|---|---|---|
| Restaurants (S001.20) | 5% | 15% for restaurants inside three-star and higher hotels and in venues with a bar; catering 15% |
| Hotels (S001.10) | AC 15%; non-AC 10% | |
| Rent of commercial space or establishment (S074.00) | 15% | Paid by the tenant through e-challan under Rule 3(5) as amended in 2026; residential rent is outside the net |
| Construction firm (S004.00) | 7.5% | VDS 10% |
| Building construction and sale (S010.20); land developer | 2% up to 1,600 sq ft; 4.5% above; 2% on re-registration; developer 2% | |
| IT-enabled services (S099.10) | 5% | VDS 5% |
| Online marketplace / sale via online platform (S099.60) | 5% on the commission | Secondary-sourced; VDS table shows 15% — confirm with the Third Schedule |
| Online advertisement (new S007.20) — social media, search, OTT, marketplaces | 5% | Introduced 2026; the Bill’s 15% was cut to 5% on passage |
| Advertising agency (S007.00); consultancy (S032.00); legal (S045.00); audit (S034.00); security (S040.00); manpower supply (S072.00); event management; courier | 15% | All VDS at 15% |
| Procurement provider (S037.00) | 7.5% | VDS 10% |
| Transport contractor (S048.00) | Petroleum 5%; other goods 15% | |
| Furniture — manufacturer and showroom (S024.00) | 7.5% | |
| Internet (S012.14) | 5% | The January 2025 increase to 10% was withdrawn |
| Jewellers (S026.00) | Fixed Tk 2,500 per bhori of gold, platinum or diamond; Tk 100 silver | Replaces the 5% rate from 2026-27 |
| Medicine at trading stage | 2.4% | Petroleum and LPG at trading stage 2%; general traders 5% |
| Mobile talk-time and data | 15% VAT plus 20% supplementary duty | |
| Freelancing and content creation by individuals | Exempt | First Schedule, 2026; non-personal services exempt by SRO to 30 June 2029 |
| Registered startups — local supplies, imported services, premises rent | Exempt 1 July 2026 – 30 June 2035 | SRO 147/2026; buyers do not deduct VDS |
Supplementary duty sits on top of VAT for the usual suspects — cigarettes 350%, other tobacco 150%, heated tobacco 67% and nicotine pouches 40% (each with a 1% health surcharge from 2026), beverages 100%, cosmetics 45% at import — and the Finance Act 2026 moved several items (fresh fish, certain plant extracts) from the First Schedule exemption into the 15% net at import. For imports, see our customs duty guide; the VAT on an import is charged on the duty-paid value.
Facebook, Google and other foreign platforms
Advertising bought from Meta, Google, TikTok or any foreign platform is an imported service. VAT at 15% is due by reverse charge under s.20; since the 2026 amendments the authorised dealer bank deducts it when you remit the payment and the e-challan it issues is both your proof of payment and your input-credit document. The large platforms are themselves VAT-registered non-residents in Bangladesh, which is why a local agency’s invoice to you for the same service carries the new 5% online-advertising rate rather than 15%. Facebook sellers themselves are taxed like any other trader — see our BIN guide for the thresholds — and the marketplace’s commission is a 5% service.
VAT deducted at source (VDS): who, what, how much
Certain customers must not pay the VAT on an invoice to the supplier; they must deduct it and deposit it themselves. Under s.2(21) and the VDS Rules 2025 the withholding entities are: government ministries, departments and offices; semi-government and autonomous bodies; statutory bodies; local government; NGOs approved by the NGO Affairs Bureau or the Social Welfare Department; banks, insurers and financial institutions; secondary and higher educational institutions; limited companies; and any person whose annual turnover exceeds Tk 10 crore.
What they deduct on. The services in the VDS schedule, at the rate shown against each code — 15% for consultancy, legal, audit, advertising agency, security, manpower, courier and event management; 10% for construction firms and procurement providers; 5% for ITES and online advertising; and so on. What they do not deduct on (Rule 5): a manufacturer’s Mushak 6.3 at the standard, reduced or specific rate; a trader’s 6.3 at 15% with e-VAT proof; services outside the schedule invoiced on a 6.3; fuel, gas, water, electricity and telephone bills; First Schedule exempt items; zero-rated supplies; EFD, SDC or POS invoices carrying the buyer’s BIN; and locally made medicine bought from traders.
Mechanics. A registered withholder shows the deduction in its own monthly return and issues Mushak 6.6 to the supplier within three working days of filing; an unregistered withholder deposits within 15 days of payment and issues the 6.6 within three working days of the deposit. The supplier takes the 6.6 as a decreasing adjustment within the same or the next six periods. Failure to deduct or deposit makes the withholder jointly and severally liable with interest, and exposes the deducting officer, the responsible officer and the chief executive personally to a fine of up to Tk 25,000 (s.85(1A)). The 2026-27 schedule is SRO 140 of 7 June 2026, amending the VDS Rules 2025 (SRO 182 of 27 May 2025).
Reading your own invoices
Three checks we run on every client’s sales and purchase invoices. First, is the service code on the invoice the right one? A consultancy firm invoicing at 5% as “ITES” is a common and expensive mistake. Second, who pays the VAT to the government — the supplier, the tenant (commercial rent) or the customer (VDS)? Paying it twice is as common as not paying it. Third, for reduced-rate supplies, has the supplier remembered that it loses input credit on the inputs to that supply (s.46)? A 7.5% construction firm cannot credit the 15% on its cement. The Mushak 6.3 guide covers what the invoice must show; the Mushak 9.1 guide covers how the numbers reach the return.
Classify
We map each of your supplies to its service code and rate, and each of your purchases to its VDS treatment.
Document
Invoice templates per supply type, and the 6.6 workflow for what you deduct and what is deducted from you.
Model the credit
For reduced-rate suppliers we calculate what input credit survives s.46 and whether the reduced rate is a net gain.
Watch the SROs
Rates move every June and sometimes mid-year; we send retained clients a one-page note when yours changes.
Common questions
What is the VAT rate in Bangladesh?
15% is the standard rate under s.15; exports are 0%. The Third Schedule applies reduced rates (1.5% to 10%) or fixed amounts to listed goods and services.
What is the VAT on restaurants?
5% for restaurants generally; 15% for restaurants in three-star and higher hotels and in venues with a bar.
Who pays VAT on office rent?
Rent of commercial space is 15%, and under Rule 3(5) as amended in 2026 the tenant pays it to the government through e-challan rather than paying it to the landlord. Residential rent is outside the net.
What is the VAT on Facebook advertising?
Bought directly from Meta or another foreign platform: 15% by reverse charge, deducted by your bank at remittance. Bought through a local agency under the new online-advertising code: 5%.
What is the VAT on construction?
Construction firms 7.5% (customers deduct 10% VDS); sale of built apartments 2% up to 1,600 sq ft and 4.5% above; land developers 2%.
Who must deduct VAT at source?
Government and statutory bodies, local government, approved NGOs, banks, insurers and financial institutions, secondary and higher educational institutions, limited companies, and anyone with annual turnover above Tk 10 crore, on the services in the VDS schedule.
When is Mushak 6.6 issued?
Within three working days of filing the return (registered withholder) or of depositing the deducted VAT (unregistered withholder, which must deposit within 15 days of payment).
Are freelancers exempt from VAT?
Yes. Personal services of freelancers and content creators were made exempt by the Finance Act 2026; non-personal freelancing services are exempt by SRO to 30 June 2029.
More in Tax, VAT & Customs
Income tax returns, TIN, VAT and BIN, Mushak forms, customs duty and what to do when NBR sends a notice.
Not sure which rate applies to what you sell?
Send us two invoices — one sale, one purchase — and we will tell you the right rate, the right code and who should be paying. A written assessment costs nothing.
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