Online shopping may get costlier as Bangladesh hikes VAT on sales commission

The cost of online shopping may increase as the proposed budget for the 2025-26 fiscal year increases the VAT rate on online product sales commissions from 5 percent to 15 percent.

Industry insiders warn that the measure is likely to have a negative impact on the e-commerce sector.

AHM Hasinul Quddus Rusho, the chief corporate affairs officer at Daraz Bangladesh -- one of the country's leading online shopping platforms, says: "The new 15 percent proposed VAT rate will significantly increase the costs of the e-commerce businesses, which will have a negative impact on both entrepreneurs and consumers."

"Previously, online sellers used to pay VAT on commission at a rate of 5 percent, which has now increased by 10 percent, so this additional cost will either have to be borne by the seller, or it will be passed on to the consumer as an additional hike in the price of the product. As a result, this threatens the future of e-commerce businesses."

“Notably, 95 percent of Daraz’s sellers are small and medium enterprises (SMEs), on whom this additional cost will have a completely negative impact in the current economic context,” says Rusho. “This VAT increase will hamper the growth of the e-commerce sector and hinder our progress towards global competitiveness.”

However, another trader who has been in the sector for nearly a decade, said: “There are millions of sellers who use Facebook. The government cannot collect the 5 percent VAT they levied from them. The government does not have a mechanism to do so. Now it is being collected at 15 percent. What will happen if tax officials catch them and impose harsh penalties? There are millions of online retailers now. How will they collect VAT from them?”