Bangladesh’s steel industry has called on the government to withdraw proposed increases in VAT and import duties included in the 2026-27 national budget, warning that the measures could significantly raise production costs at a time when mills are operating well below capacity.
According to local media reports, the Bangladesh Steel Manufacturers Association (BSMA) said the industry is already facing rising electricity tariffs, transportation costs, port charges and other operating expenses.
BSMA President Mohammed Jahangir Alam said recent increases in electricity tariffs have raised steel production costs by BDT 1,800-2,000 (USD 14.6-16.2)per ton, while higher logistics and operational expenses have added a further BDT 3,000-3,500 (USD 24.4-28.4) per ton.
The association warned that proposed increases in VAT on steel sales and locally sourced scrap, along with higher duties on ferro-alloys, refractory materials and spare parts, could add another BDT 2,000-2,500 (USD 16.2-20.3) per ton to production costs. Combined with the impact of low capacity utilization, total additional costs could reach BDT 11,000-12,000 (USD 89.5-97.6) per ton.
According to the BSMA, Bangladesh’s annual steel demand is around 5 mln tons, while installed production capacity exceeds 10 mln tons, leaving many producers operating at less than 50pct of capacity.
The association welcomed several business-friendly measures included in the proposed budget, such as lower withholding tax on foreign loan interest payments and reduced tax deductions on electricity bills. However, it said these benefits would be outweighed by the proposed increases in taxes and duties on steel-related inputs.
BSMA urged the government to maintain the existing VAT structure on steel sales and local scrap, withdraw the proposed additional duties and taxes on raw materials, restore the turnover tax rate to 0.6pct from the proposed 1pct, and accelerate infrastructure and development projects to stimulate steel consumption and improve capacity utilization.
1 USD / 122.8 BDT