Analysis:

Bangladesh Budget
2019-20

Analysis of Budget FY20 1

 Overview
Overview Table: Summary of Budget (BDT bn)
• The outgoing 2018-19 fiscal year saw the Bangladesh economy FY20 FY19(R) FY19 FY18(A)
continue on its accelerated growth trajectory. GDP growth reached a
record 8.13%, crossing the 8% mark for the first time. However, 3,778.10 3,166.13 3,392.80 2,165.55
Revenue
challenging external sector performance continued in FY19 and led (13.10%) (12.50%) (13%) (9.60%)
to a current account deficit of USD 5 bn in the Jun-Apr period, which NBR Tax 3,256.00 2,800.00 2,962.01 1,871.03
led to BDT depreciating by 1% YoY in June 2019. Low deposit growth
Non-NBR Tax 145 96 97.27 72.23
rates resulted in tight liquidity situation and a general increase in
interest rates, which negatively affected the capital market. Non Tax Receipt 377.1 270.13 333.52 222.29
• The GDP growth target for FY19 has been set at 8.2%, which might 5,231.90 4,425.41 4,645.73 3,218.62
prove challenging given rising interest rates and falling private sector Expenditure
credit growth. Inflation target has been set at 5.5%, which is close to (18.10%) (17.40%) (18%) (14.30%)
the March 2019 level of 5.48% . The proposed budget size is BDT Non-Development 2,779.34 2,477.47 2,516.68 1,788.79
5,231.9 bn, which is 18.22% larger than the previous budget. The Development 2,116.83 1,734.49 1,796.69 1221.54
revenue target is BDT 3,778.1 bn, 19.33% higher than FY19. The
2,027.21 1,670.00 1,730.00 1195.38
budget deficit is projected to be 5.04%, roughly the same as FY19. ADP
(7.00%) (6.60%) (6.80%) (5.30%)
Table: Budget Overview FY19 (BDT bn) Other 335.73 213.45 332.36 208.29
FY20 FY19(R) Growth
1,453.80 1,259.29 1,252.93 1053.06
5,231.90 4,425.41 18.22% Deficit
Budget Size (5.00%) (5%) (5%) (4.70%)
(18.13%) (17.45%)
3,778.10 3,166.13 19.33% External borrowing 680.16 471.84 540.67 264.89
Target Revenue
(13.09%) (12.48%) Domestic borrowing 773.63 787.45 712.26 790.76
1,453.80 1,259.29 15.45% Bank borrowing 473.64 308.95 420.29 117.31
Budget Deficit
5.04% 4.97% Non-bank borrowing 299.99 478.5 291.97 673.45
473.64 308.95 53.31% 28,857.72 25,361.77 25,378.49 22,504.79
Bank Borrowing GDP
1.64% 1.22% Source: Budget Speech, Ministry of Finance
680.16 471.84 44.15%
External Borrowing
2.36% 1.86%
GDP 28,857.72 25,361.77 13.37%
Source: Ministry of Finance. Figures in parentheses indicate percentage of GDP

Analysis of Budget FY20

Budget Targets
• GDP growth in FY19 reached 8.13% (provisional figure). This is the Chart: GDP Growth
highest ever GDP recorded in Bangladesh. The FY20 budget targets
GDP growth of 8.2%. The IMF has forecast GDP growth of 7.3% for 8.13%
7.86%
2019. 8.20%
• Inflation has been steadily coming down over the years, from 10.91%
7.20% 7.20% 7.30% 7.28% 7.80%
in FY11 to 5.48% in March 2019. A bumper rice harvest and 7.11%
7.00%
adequate stocks are expected to keep food inflation at low levels but 6.70% 7.20%
7.40%

increase in gas prices due to introduction of imported LNG to the gas 7.00%
supply network along with depreciation of BDT might cause non-
6.52% 6.55%
food inflation to spike up. 6.46%

• In FY19, import growth came down significantly to 3.88% in the Jul- 6.01% 6.06%
Apr period, down from 25% in FY18. Export growth, on the other
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
hand, increased noticeably to 11.92% in FY19. Depreciation of the
BDT and the trade war between the US and China contributed to the Target Actual

healthy growth in exports.

Chart: Inflation
Chart: Import and Export Growth
10.91%

41.36% 8.69%
10.20%
42.19%
8.60% 7.35%
6.78%
25.23%
6.40%
7.40%
5.90% 5.44% 5.78%
19.35% 6.80% 6.60% 5.48%
6.00% 5.80%
9.05% 5.50% 5.60% 5.50%
11.11% 11.92%
9.94%
6.11% 5.81%
11.85% 3.31% 1.46%
5.34% 6.16%
3.88%
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19*
-3.94%
-0.25% FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19* FY20

Export Growth Import Growth Target Actual

Source: Bangladesh Bank

Analysis of Budget FY20

Expenditure
• The FY20 budget growth is more restrained compared to previous Chart: Size of Budget (BDT bn)
years (18.22% growth over previous year’s revised budget, as 6,000 20%
18% 16%
compared to 25% for FY19 and 26% for FY18). This may lead to a 17% 18% 5,232
16%
more realistic view of the challenges faced in implementing budgets, 5,000 15% 4,646

and lead to the FY20 revised budget being closer to the initial targets. 4,003 15%
13%
4,000 13%
The challenges in achieving the revenue target in FY19 and the 3,406
2,951
current account deficit provide a barrier to undertaking large new 3,000 2,506 10%
projects. The FY20 budget is estimated to be 18.1% of GDP as against 1,917
2,225

17.4% in FY19(R) budget. 61.2% of the budget is allocated towards 2,000

5%
operating expenses while 38.7% of the budget has been allocated 1,000
towards the ADP.
- 0%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
• The FY20 budget has allocated BDT 332.02 bn for PPP subsidies,
Size Growth
financial assistance to different industries, subsidies and equity Source: Ministry of Finance
investments in nationalized corporations, banks, and financial Chart: ADP Sectoral Allocation
institutions, which is 6.35% of the total budget and a 72% growth
from the revised FY19 budget.
Total ADP

• 54.94% of the FY19 ADP budget was implemented in the Jul-Apr’19

period. The FY20 ADP program is 21% greater than the revised FY19 Others
ADP budget, and places relatively higher importance to the Human
Resource and Communications infrastructure development compared Communication Infrastructure
to the previous years’ ADP. Agriculture and Rural Development and
Energy Infrastructure have also received large allocations, to
Energy Infrastructure
accelerate development in rural areas and to meet the energy needs
of a growing economy.
Agriculture and Rural Development

• Interest payments in FY20 is projected to comprise 10.91% of the

FY20 budget, a decrease from the 11.01% allocation in FY19(R) Human Resource

budget. This may be achieved by changing the borrowing mix to

0.00 500.00 1000.00 1500.00 2000.00 2500.00
include greater proportion of bank borrowing rather than national
savings certificates, which carry higher interest rates. Actual FY17 Actual FY18 Budget FY19 Revised FY19 Budget FY20
Source: Ministry of Finance

Analysis of Budget FY20

 Sectoral Allocation
• Compared to the FY19, allocation to PPP Subsidy and Liability has seen Chart: Sectoral Allocation (%)
a huge increase, comprising of 6.35% of the FY20 budget. Allocations
towards Social Infrastructure, Physical Infrastructure, General Services, 0.24%

Interest Payments and Net Lending and Other Expenditure have all 6.35% (a) Social Infrastructure
decreased in FY20.
10.91% (b) Physical Infrastructure
• Allocation to PPP Subsidy, Communications Infrastructure and Human 27.41%
Resource sectors have increased by 72.8%, 32.4% and 17.6% (c) General Services
respectively while allocation to Net Lending and other Expenditure has
fallen by 47.34% compared to the revised FY19 budget. (d) Interest Payments
23.63%
• BDT 432.3 bn was allocated for subsidies, a 24.5% increase from (e) PPP Subsidy and Liability
FY19(R). Subsidies now accounts for 8.3% of the FY20 budget and 1.5%
31.46%
of GDP. Agriculture was allocated 20.8% of the of total subsidy while a (f) Net Lending and Other
Expenditure
2% subsidy was introduced for workers remittances to Bangladesh.
Source: Ministry of Finance
Growth
Budget FY19 Growth
Ministry/Division Budget FY20 % of Total % of Total over FY19 Budget FY19 % of Total
(R) over FY19
(R)
Human Resource 1290.56 24.67% 1097.76 24.81% 17.56% 1132.08 24.37% 14.00%
Food and Social Safety 143.73 2.75% 137.48 3.11% 4.55% 138.14 2.97% 4.05%
Agriculture and Rural
662.34 12.66% 596.77 13.49% 10.99% 589.29 12.68% 12.40%
Development
Power and Energy 280.51 5.36% 265.03 5.99% 5.84% 249.2 5.36% 12.56%
Communication
613.6 11.73% 463.48 10.47% 32.39% 530.81 11.43% 15.60%
Infrastructure
Public Order and Safety 276.37 5.28% 280.68 6.34% -1.54% 265.94 5.72% 3.92%
Interest Payments 570.7 10.91% 487.45 11.01% 17.08% 513.4 11.05% 11.16%
PPP Subsidy and Liability 332.02 6.35% 192.14 4.34% 72.80% 224.16 4.83% 48.12%
Net Lending and Other
12.45 0.24% 23.64 0.53% -47.34% 24.89 0.54% -49.98%
Expenditure
Total Budget 5,232 4,425 4,646
Source: Ministry of Finance

Analysis of Budget FY20

Revenue and Financing
• The FY20 budget has a revenue target of BDT 3,778.10 bn, which is Chart: FY20 Revenue and Financing Sources
19.3% higher than the target of BDT 3,166.13 bn in the revised FY19 Non-Bank
Borrowing
budget. The targeted revenue growth rate for FY20 is lower than that 9%
Bank Borrowing
for previous budgets. The percentage of revenue to come from NBR 6%
has decreased from 87.30% in FY19 to 86.18% in FY20.
• The VAT and Supplementary Duty Act 2012 will go into effect from 1
External financing
July 2019, which will usher in a new era in VAT collection. Electronic 13%
fiscal devices will be mandatory for VAT payers to keep track of sales. 4
VAT rates have been introduced (5%, 7.5%, 10% and 15%) with two
additional rates of 2% and 2.4% for the pharmaceuticals industry. The Non Tax Receipt NBR Tax
VAT exemption threshold has been set at BDT 5 million per annum and 7% 62%

Package VAT and Truncated value base rates have been discontinued. Non-NBR Tax
3%

Source: Ministry of Finance

Chart: Revenue Sources (% of total) Chart: Deficit Financing Sources

9.83%
Non Tax Receipt
9.98% Non-Bank
Borrowing
32%

2.87%
Non-NBR Tax External Sources
3.84% 47%

87.30%
NBR Tax
86.18%

0.00% 20.00% 40.00% 60.00% 80.00% 100.00%

Bank Borrowing
FY19 FY20 21%
Source: Ministry of Finance Source: Ministry of Finance

Analysis of Budget FY20

Deficit
• The FY20 budget a projected deficit of BDT 1,453.80 bn, which is 27.8% Chart: Deficit (% of GDP)
of the total budget expenditure and 5.0% of GDP. The budget deficit as
percentage of GDP has been kept constant at 5%, in line with previous
5.00% 5.00% 5.00% 5.00% 4.90% 5.00%
years’ budgets. The deficit is 15.40% larger than the FY19(R) budget
4.40% 4.40%
deficit. 4.10%
• The share of the deficit to be financed from external sources has seen a
significant leap, from 37.47% in FY19 to 46.79% in FY20. It remains to
be seen whether the government will be able to mobilize such an
increase in external revenue mobilization. Non-bank borrowing target
has been reduced by 37% which might be achieved by creating barriers
to purchase national savings certificates. Bank borrowing target in FY20
is 53% higher than FY19(R) which might cause rates to rise further and
crowd out private sector credit growth. FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

• The budget deficit of Bangladesh is at a moderate 5.0% of GDP, which Source: Ministry of Finance
is higher than China and India, whose deficits are 2.8% and 3.4% of GDP Chart: Budget Deficit in Peer Countries (% of GDP)
respectively, but lower than Sri Lanka (5.3%) and Pakistan (7.2%)
Chart: Deficit Financing Sources 7.20%

32.58%
Non-bank borrowing 5.30%
38.00% 5.00%

20.64% 3.40%
Bank borrowing
24.53%
2.80%

46.79%
External borrowing
37.47%

FY20 FY19 India Pakistan China Sri Lanka Bangladesh

Source: Ministry of Finance Source: Ministry of Finance

Analysis of Budget FY20

 Megaprojects
Megaproject Cost (BDT bn) Progress (Feb 2019) Deadline
Padma Bridge 301.93 59.30% Dec-19
Moheshkhali Single Point Mooring 54.26 15.00% Dec-19
Karnaphuli Multilane Road Tunnel 84.47 28.90% Jun-20
Payra Port Support Facilities 35.06 17.40% Jun-20
SASEC Road Connectivity: Joydebpur - Elenga 55.93 46.30% Jun-20
SASEC Road Connectivity: Elenga - Rangpur 118.99 3.30% Aug-21
Dohazari-Cox’s Bazar Dual Gauge Track 180.34 18.70% Jun-22
Dhaka-Ashulia Elevated Expressway 169.01 0.40% Jun-22
Ghorashal Polash Urea Fertilizer Project 104.61 0.00% Jun-22
Rupsha 800MW Combined Cycle Power Plant 84.99 2.40% Jun-22
Matarbari 2x600MW Coal-Fired Power Plant 359.84 21.40% Jun-23
Dhaka Metro Rail 219.85 26.70% Jun-24
Padma Bridge Rail 392.47 26.40% Jun-24
Rooppur Nuclear Power Plant 1130.93 14.70% Dec-25
Source: CPD
• The government allocated BDT 439.19 bn in FY20 for fast-track megaprojects, which represented 21.7% of the total ADP. The allocation towards
megaprojects in the FY19 budget was BDT 288.49 bn, which comprised 17% of the total ADP for FY19. The pace of work on megaprojects is
projected to pick up pace as there will be no election-related political uncertainty in FY20 unlike FY19.
• Among all the projects, Padma Multipurpose Bridge Construction project progressed most with 59.30% completed till February 2019. The Cost of
this project reached to BDT 301.93 billion.
• 5 of the megaprojects are scheduled to be completed within FY20. Among these are the Padma Multipurpose Bridge, the Moheshkhali Single Point
Mooring, Karnaphuli Multilane Road Project, Payra Port Support Facilities and SASEC Road Connectivity: Joydebpur – Elenga road project. However,
given the current progress and rate, none of the projects are expected to meet their deadline.

Analysis of Budget FY20

 Taxation - Individual
Minimum Income for Individual Tax Payer • The FY20 budget has not introduced any changes in the tax slabs and
Types of Tax Payer Threshold of Taxable Income tax rates of personal income tax.
General Tax Payer BDT 250,000 • The tax-free threshold for personal income remains at BDT 250,000.
Women & Senior Citizens BDT 300,000 • Individuals with net wealth greater than BDT 500 million must pay a
Persons with Disabilities BDT 400,000 minimum tax of higher of 0.1% of net wealth or 30% of income tax
Parents of Children with Disabilities* BDT 300,000 payable annually.
War-wounded gazetted freedom fighters BDT 425,000 • The minimum net wealth exemption limit is increased to BDT 30
*Additional 50,000 limit for each disabled child million from the previous BDT 22.5 million. A 10% wealth surcharge
Tax Rate for other than companies will now be applicable for owners of at least two cars or at least
For Individuals Tax Rate 8,000 sqft of housing property within City Corporation areas.
First BDT 0.25 mn Nil • Minimum threshold for deduction of tax at source has been
Next BDT 0.40 mn 10.00% increased from BDT 600,000 from BDT 400,000
Next BDT 0.50 mn 15.00% • The minimum tax payment for tax payers is kept unchanged. It is
Next BDT 0.60 mn 20.00% BDT 5,000 for Dhaka North, Dhaka South, and Chittagong; BDT 4,000
Next BDT 3.00 mn for other city corporations, and BDT 3,000 for the rest of the
25.00% country.
For Others
Tobacco products manufacturers other than company 45.00% • NRBs who derive income from permanent establishments in
Bangladesh need to pay tax on income sourced from these
Non-residents (Other than NRBs) 30.00%
establishments.
Registered Co-operative Society 15.00%
• Existing provisions about undisclosed money remain the same as
Surcharge Rate on Individual’s Net Worth previous years. Undisclosed income can be invested in real estate,
Net Wealth Rate government treasury bonds by paying 10% tax, and voluntary
Up to BDT 30 mn Nil disclosure of income through payment of 10% penalty in addition to
Between BDT 30 mn and BDT 50 mn* 10.00% regular tax. In addition, undisclosed money can be invested in
Between BDT 50 mn and BDT 100 mn 15.00% economic zones or high tech industrial parks by paying 10% tax.
Between BDT 100 mn and BDT 150 mn 20.00% • Investment tax rebate has been set to 15% if total income is less
Between BDT 150 mn and BDT 200 mn 25.00% than BDT 1.5 million, and 10% otherwise.
Exceeds BDT 200.0 mn 30.00%
Minimum Surcharge (>22.5mn & <100mn) BDT 3,000
Minimum Surcharge (>100mn) BDT 5,000
*Or ownership of 2 motor cars or ownership of house properties aggregating to 8,000 sft or above in
a city corporation
Source: Ministry of Finance

Analysis of Budget FY20

 Corporate Tax and Capital Market
Corporate Tax Rates Capital Market
Company Category Tax Rate • Dividend up to BDT 50,000 has been exempted from income tax,
Publicly Traded Company 25.00% instead of BDT 25,000 previously. This will reduce the tax burden on
Non-publicly Traded Company 35.00% small individual investors.
Publicly Traded Bank, Insurance and NBFI (ex Merchant Bank) 37.50% • Tax rebate on investments have been increased to a flat 15% for
Non-publicly Traded Bank, Insurance and NBFI (ex Merchant Bank) 40.00% income does not exceed BDT 1.5 million, and 10% otherwise. This
Merchant Bank 37.50% step will reduce the tax burden on individuals with lower income
Tobacco Good Manufacturers:
while raising the tax burden on richer individuals.
Cigarette Manufacturers (Public or non-public) 45.00%
• 15% tax has been imposed on stock dividends declared by a listed
Other Tobacco Product Manufacturers 45.00%
company. In addition, a 15% tax has been imposed on companies
Mobile Phone Operators:
whose retained earnings and reserves exceed 50% of paid up
Publicly Traded 40.00%
capital. The new tax on stock dividends will eliminate the
Non-Publicly Traded 45.00%
opportunity of companies to re-invest their retained earnings tax-
Textile Manufacturers:
free. Profitable companies will therefore be incentivized to pay out a
Non-Publicly Traded 15.00%
Publicly Traded 12.50%
greater proportion of earnings as cash dividends. However, the new
Non-Publicly Traded with Green Factory Certification 12.00% tax will increase the cost of capital for companies and decrease their
Publicly Traded with Green Factory Certification 12.00% intrinsic value. Companies with large accumulated retained earnings
Dividend Income 20.00% and reserves are likely to increase their paid up capital with a large
one-time stock dividend to increase their paid-up capital and
Source: Ministry of Finance
decrease retained earnings.
• Corporate tax rates remained largely unchanged
• The TDS on interest from National Savings Certificates has been
• Tax exemption on dividends received have been extended to all
increased to 10% from the previous 5%. At the same time, online
companies from the previous exemption on local companies only.
management system for NSC sales has been introduced. The
• Minimum tax of mobile telecommunications companies has been
combined measures are likely to divert capital to banks and the
raised to 2% of their annual turnover from 0.75%
capital market
• Provision of 12% corporate tax on RMG factories (10% if there is a
green building certificate) has been extended for 1 year.
• Reduced tax rates on publicly traded banks, insurance and financial
institutions have remained unchanged at 37.50%
• Tax holiday facilities have been extended for industries beginning
operations between 1 July 2019 and 30 Junes 2024, however, 90%
of income will enjoy tax exemption in first year rather than 100%
previously.
Analysis of Budget FY20
 Corporate Tax and Capital Market
Amended VAT Act, 1991 (Prevailing) New VAT and SD Act, 2012
Basis Price declared by VAT payers and approved by VAT authorities

Rates 9 (2%, 3%, 4%, 4.5%, 5%, 7%, 7.5%, 10%, 15%) 6 (5%, 7.5%, 10%, 15%; 2% and 2.4% for pharmaceuticals)

VAT exemption threshold BDT 3 mn BDT 5 mn

Package VAT Continued Discontinued
Truncated VAT Continued Discontinued
Tarriff value Continued Continued on only 12 products
Turnover tax rate 3% if turnover below BDT 8 mn 4% for turnover between BDT 5 mn and 30 mn
Return Submission Manual Mix of manual and automated
Input tax credit No credit on land, building, office equipment, vehicles and labour Applicable for 15% rate

• The VAT and SD Act, 2012 will go into force from 1 July 2019 after • EFD (Electronic Fiscal Device) will be mandatory for shop owners and
many years of delays. businesses to record sales information
• VAT revenue is targeted to grow by 17.4% in FY20 • VAT exemption threshold raised from BDT 3 mn to 5 mn
• Coverage of VAT has been widened • VAT exemption on rent of showroom by female entrepreneur, hand-
• VAT will be based on market price made bread and bakery items with value of upto BDT 150/kg
• Online services will be available for VAT registration, payment, • VAT exemptions on pacemaker, heart valve, dialysis machine, cancer
return submission and refund medicines
• VAT registration threshold increased from BDT 8 mn to 30 mn. • VAT exemptions on local agricultural machines, plastic sandals and
• Turnover tax rate increased to 4% for turnover between BDT 5 mn slippers
and 30 mn • VAT and SD exemption on raw materials for manufacture of lifts and
• 4 standard rates (5%, 7.5%, 10% and 15%) are applicable on goods, compressors, jute based products, supply of electricity to High Tech
with 2 special rates (2% and 2.4%) applicable for pharmaceutical and parks, suppliers of gas and electricity to BEZA and PP projects
petroleum products • Increase of SD on mobile services from 5% to 10%
• VAT exempted for marginal traders with turnover less than BDT 5 • VAT on ecommerce sites set at 7.5%
mn

Analysis of Budget FY20

Industry Implications
Bank Insurance and NBFI Pharmaceuticals
• The corporate tax rates on banks, insurance companies and financial • Allocation to health stands at 4.9% of FY20 budget, down slightly
institutions remain at 37.5%. from 5% in FY19(R)
• Central database for large credit (CDLC) has been established for • Cancer medicines exempted from VAT
close monitoring of large loans and strengthening the monitoring • Heart valves, pacemakers and artificial kidneys have been exempted
system of banks and financial institutions. from VAT.
• Paid up capital of banks to be increased gradually • Regulatory duty on Oxygen, Nitrogen, Argon and Carbon Dioxide has
• Bank Company Act will be amended so that amalgamation, merger been reduced to 10% from 20% as they have extensive medical uses.
and absorption of banks can be legally processed • VAT rate of pharmaceutical products at the trading stage will be only
• Instruction has been given to keep the weighted average spread of 2.4%.
interest rates limited within 4% except for credit cards and consumer • Cash incentive at the rate of 20% is being provided to encourage
loans. exports from the producers of pharmaceutical raw materials and
• With the assistance of Jiban Bima Corporation, the existing system to laboratory reagents.
be reformed and converted into an integrated insurance system for Telecommunications
bringing all government employees under the insurance coverage. • Minimum tax increased from 0.75% of turnover to 2% of turnover.
• Stern action to be taken against wilful loan defaulters Will affect loss-making telecoms companies.
• Interest rates to be brought down to single digit • SD on all SIM-based services increased from 5% to 10%
• Pilot project for ‘crop insurance’ to be introduced • Customs duty on smartphones increased from 10% to 25%
• Insurance of properties generated from large projects will be • VAT proposed on import of telecoms equipment
covered by the local insurance companies ICT & Electronics
• Insurance for ‘loss of profit’ will also be introduced. • Duty tax on transistors and crystal diodes decreased from 5% to 1%
• Accident insurance for factory workers will be implemented. • Duty tax on charger connector pin and SIM slot ejector pins
• The government is planning to introduce livestock insurance, small decreased from 25% to 10%
insurance for poor women and health insurance for government Food
employees and common people. • 10% SD imposed on milk power import from 5% previously.
Fuel & Power • Import duty on both raw and refined sugar increased 50% and 75%
• VAT on LP gas set at 5%, which is likely to keep LP gas affordable, respectively. Regulatory duty increased from 20% to 30%
especially in addition to gas subsidies. • Regulatory duty on starch increased.
• VAT on petroleum trading stage kept at 2% • 5% Supplementary Duty has been proposed on Ice-cream
• Gas subsidies set at BDT 96 bn, a 113.3% rise. However, this level of • VAT has been proposed on Soybean oil, Palm oil, Sunflower oil &
subsidies will still require increase of gas price. Mustard oil which are now enjoying exemption benefit.
• Allocation to power division is BDT 266.04 bn, a 13.64% increase.

Analysis of Budget FY20

Industry Implications
Animal Feed Miscellaneous
• Duty and taxes of feed ingredients used Poultry/Dairy/Fish feed have • Private car ownership will be discouraged due to the imposition of
been reduced to 0% 10% supplementary duty on issuance and renewal of registration,
Real Estate route permit, fitness certificate and ownership certificates. This will
• Stamp duty and registration fee to be reduced for real estate sector not be applicable for passenger buses, trucks, lorries, three
• Tax rate to be reduced for investment of undisclosed funds for wheelers, ambulances and school buses.
purchase or construction of any apartment or flat, and building • Duties on motorcycle tyres and tubes has been increased from 3%
Textile to 5% while duties on air-filters and brakes have been cut to 15%
• 12% tax rate for RMG factories (10% if certified green building) will from 25%.
continue for one more year
• 15% tax rate for textile sector companies to continue for 3 more
years
• RMG factories not eligible for prevailing 4% export cash incentive to
get 1% cash incentive
• Price of clothing likely to rise due to 7.5% VAT from existing 5%
Tobacco
• Price of cigarettes will increase in all segments. Proposed price per
10 segments in low segment is BDT 37 up from BDT 35 (5.7%),
medium segment price will rise to BDT 63 from BDT 48 (31.3%), high
segment will rise to BDT 93 from BDT 75 (24%) and premium
segment will rise to BDT 123 from BDT 105 (17.1%). The
supplementary duties will remain unchanged at 55% for low
segment and 65% for all other segments. Demand for cigarettes is
usually inelastic, however, higher duties could encourage smuggling
of cigarettes from neighbouring countries.
• 10% export duty on tobacco has been lifted in FY20
• Price of zarda has a floor of BDT BDT 30 per 10 grams and gul has a
floor of BDT 15 per 10 grams. A duty of 50% will also be imposed on
these products to discourage their use.

Analysis of Budget FY20

Disclaimer
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the Report in their entirety, irrespective of whether the Report is used or viewed in whole or in part.

LankaBangla Asset Management Company Ltd

M A Faisal Mahmud Chief Investment Officer [email protected]

Simon Ibn Muzib Fund Manager [email protected]
Azmal Hossain Rafi Research Analyst [email protected]
Mostafa Noman Research Analyst [email protected]
Abdullah Al Shaekh Research Analyst [email protected]
Bilkish Barkat Ali Research Analyst [email protected]
Md Rakibuzzaman Alternative Investment Analyst [email protected]
Saad Niamatullah Alternative Investment Analyst [email protected]

LankaBangla Asset Management Company Limited

Corporate Office
Praasad Trade Center (4th Floor)
6 Kemal Ataturk Avenue
LBAMCL’s research reports are also available on
Banani C/A, Dhaka-1213
http://www.lbamcl.com Phone: +880-2-9820219-21
Fax: +880-2-9822159
Email: [email protected]
Website: www.lbamcl.com

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