Solar, EVs, electronics in line for big tax breaks in budget

Meanwhile, the total tax burden on imported electric vehicles currently stands at around 90%, which may be significantly reduced.

The government is considering a package of incentives in the upcoming budget to boost investment in renewable energy, aiming to reduce pressure from energy supply uncertainty and continuously rising energy prices.

At the same time, it may announce new incentives or extend existing benefits for another three to four years to encourage investment in local industries, particularly home appliances, computers, laptops and electric vehicles (EVs).

Currently, locally manufactured computers and laptops enjoy VAT exemption, which is set to expire on 30 June next year. The government may extend this benefit until 2030.

Similarly, the reduced-rate import duty facility on machinery and components used to manufacture home appliances such as blenders and juicers is due to expire this year, but could also be extended until 2030.

Meanwhile, the total tax burden on imported electric vehicles currently stands at around 90%, which may be significantly reduced. Sources also said that VAT and income tax concessions, along with duty benefits on imported raw materials, may be offered to support local EV manufacturing.

These developments have emerged from budget-related discussions within the finance ministry and the National Board of Revenue (NBR).

At present, import taxes on various rooftop solar equipment and components range between 36% and 63%. The proposed budget may reduce these rates to 15%.

In addition, tax exemption facilities for companies investing in commercial renewable energy projects may be extended from 2030 to 2035.

An NBR income tax official involved in budget preparations said investors making investments during this period would enjoy a full tax holiday for the first five years, followed by a 50% exemption for the next three years and a 25% exemption for the subsequent two years.

Speaking to TBS on condition of anonymity, the official said the government is preparing to take whatever measures are necessary in the upcoming budget to stimulate business and investment.

He added that renewable energy is one of the government’s priority sectors, which is why the highest levels of tax, VAT and income tax incentives are being considered to attract more investment.

Investors already supplying energy through renewable energy, particularly solar power, have welcomed the move.

Saleudh Zaman Khan, managing director of NZ Tex Group, one of Bangladesh’s leading textile manufacturers with an installed solar capacity of around 10MW, told TBS, “Import taxes on some solar equipment currently exceed 90%. If these taxes are reduced, entrepreneurs will be much more interested in investing in the sector.”

He explained that installing one megawatt of solar capacity currently costs between Tk3 crore and Tk3.25 crore, including the cost of imported equipment and related taxes. If import taxes are reduced to 15%, installation costs could fall by around Tk50 lakh per megawatt.

“Even then, the cost will remain higher than in India,” he added.

Industrial solar power generation in Bangladesh currently exceeds 500MW. However, industry insiders say solar installations are expanding rapidly and total generation capacity could more than double by the end of this year.

Golam Baki Masud, general secretary of the Bangladesh Solar Module Manufacturers Association and managing director of Greenfinity Energy Limited, noted that local investors already have the capacity to supply many solar sector components domestically.

“If local industries are not given adequate protection in these equipment categories, existing manufacturers will disappear,” he warned.

“The government must also take this into account. Due to unequal competition, nine out of 11 local solar equipment manufacturing companies have already disappeared.”

Push for local home appliance and computer industries

The government last year announced VAT rates for several local industries up to 2030. However, VAT exemptions for computer and laptop manufacturing are scheduled to expire in June 2027 and may now be extended for another three years.

Likewise, the reduced-rate import duty facility on raw materials used in manufacturing home appliances such as blenders and juicers is due to expire this year, but may also be extended until 2030.

Kamruzzaman Kamal, director of Pran-RFL Group, one of the country’s leading home appliance manufacturers, told TBS, “If government policy support for local industries continues, dependence on imports will decline.”

Experts have also supported continuing policy assistance for import-substitution industries.

Snehasish Barua, managing director of SMAC Advisory Limited, told TBS, “As local industries are gradually building their capabilities, extending support for some more time is a positive decision.”

However, he added that policymakers should assess whether these incentives are achieving their intended objectives, particularly whether import dependence is actually declining and how much benefit is ultimately reaching consumers.