Major VAT and SD Changes Through Finance Ordinance 2025

What are the major VAT and SD changes through Finance Ordinance 2025 for the financial year 2025-26 that will impact your organization?

This is the third and last article of salient features of Finance Ordinance 2025. In our previous two articles, we have published personal tax changes and corporate tax changes. If you want to get the full salient features of the Finance Ordinance 2025 then you have to read a total of three articles including the previous two.

In this article, we will only focus on major Value Added Tax (VAT) and Supplementary Duty (SD) changes 2025.

Let’s start to know the major VAT and SD changes 2025!

Advance Tax, Input Tax Credit and Decreasing Adjustment

Going through most of the sections’ change proposed in Finance Ordinance 2025, there is one common change which extends the adjustment of decreasing entries with VAT return filing.

There is a good news for the manufacturer who imported goods. As per section 31(2), advance tax on imported goods for manufacturing decreased to 2% instead of existing 3% but increased in other cases to 7.5% instead of existing 5%.

Moreover, the adjustment for decreasing entry has also been increased, so now the taxpayer will get additional tax periods to claim the advance tax payment at import stage. As per section 31(3), advance tax shall be eligible for decreasing adjustment in related tax periods or following six tax periods instead of existing four tax periods.

However, a new subsection inserted 3ka under section 31 of the Value Added Tax and Supplementary Duty Act 2012, the condition is that if the importer paid 7.5% advance tax at import stage and the value addition from domestic source is below 50% then such importer shall not pay VAT subject to the filing of VAT challan from first sale.

Input tax credit decreasing adjustment period has also been extended to six months from existing four months. However, the taxpayer shall fulfill a condition. As per section 46(1)(ga), input tax credit shall not be claimable if the input tax credit has not been claimed in the tax period or following six months of the goods purchased through invoice or bill of entry.

Additionally, as per section 50(2), decreasing adjustment by the supplier for tax withheld shall be claimed in the tax period or within next six tax periods otherwise such tax shall be time-barred. Previously the maximum tax period was three months.

Return Filing and Penalty

There is a good news for a group of taxpayers who file monthly VAT returns and also the amount of penalty has been decreased through Finance Ordinance 2025.

As per section 64 of Value Added Tax and Supplementary Duty Act 2012, any government, semi-government or statutory organisation, bank, insurance and zero return filing person shall file return within a period not exceeding 20 days of such tax period. This facility was inserted newly this year. However, for other person the deadline shall remain the same as within a period not exceeding 15 days of such tax period.

If any person fails to file return within the due date then till next financial year the penalty was BDT 5,000. But as per section 85, the penalty has been decreased to BDT 2,000 from next financial year.

There was a significant change in flexibility of claiming for refund or adjustment after filing VAT return. As per section 72, refund or adjustment of taxes paid in excess shall be claimed as refund or adjustment as decreasing adjustment following six tax periods of the return filing. Previously it was only following the next tax period.

While filing VAT return if any person claims any additional tax credit benefits than actual claim such person requires to face penalty as per law. Now the penalty for taking more input tax credit than the eligible amount per return shall be minimum 30% or maximum 50% of such entitled input tax credit.

Moreover, the payment of tax payable amounts who prefer to pay in installments has also increased the number of installments which will help taxpayers to manage financial crises if any. As per section 106(2), time limit for payment of arrear tax shall be 16 months instead of 12 months.

VAT Exemptions and VAT Rates

Every year, there are changes in the first schedule which consist of the VAT exempted goods and services. This year also there is a change in the first schedule. The full list is published on this website. So, you can keep your eyes on this website to get the full list of the first schedule.

There are also separate SROs through which the VAT exemptions have been changed for the financial year 2025-26. Our best-selling tax book “Utse Kor Korton” will be published in July 2025 from where you will get the complete practical TDS-VDS guideline which is available at Rokomari and Nilkhet.

Third Schedule of Value Added Tax and Supplementary Duty Act 2012 consists of the VAT rates that you have to withhold or make the payment from applicable transactions. This list is important to comply with the VAT and SD act. We also publish the full list of third schedule in this website.

Supplementary Duty (SD) Changes 2025

There is a change in supplementary duty through Finance Ordinance 2025. As per section 57(ga) of Value Added Tax and Supplementary Duty Act 2012, in relation to any goods where VAT is imposed on the basis of “maximum retail price”, the “maximum retail price” per section 58(2) shall be regarded as the value for imposition of supplementary duty. Previously it was “retail price” but now changed to maximum retail price.

You know, the second schedule of Value Added Tax and Supplementary Duty Act 2012 consist of the supplementary duty list. We have published the full list of the second schedule on this website in July 2025.

So, that’s all for major VAT and SD changes through Finance Ordinance 2025!

From the above article, we hope you could understand that this website will have all the VAT exemptions schedule, VAT rates, supplementary duty rates and TDS rates for the financial year 2025-26. So, whenever you are required to check any rates then you can visit this website to get your rates. This will be very helpful for your daily corporate tax related workings.