EBL Securities Ltd.

Review of
Bangladesh
National Budget
2022-23
1 Budget Snapshot

Proposed Total Total Budget

Budget Budget Revenu Deficit
2022-2023 BDT e BDT 2,450.64 bn
6,780.64 bn BDT 4,330.00 bn
GDP Growth % of GDP % of Budget Bank Borrowing
Target 15.2% 63.85% BDT 1,063.34
7.50% bn
Dev. NBR Revenue
Inflation Expenditure BDT 3,700.00 bn Non-bank Borrowing
Target BDT 2,460.66 bn BDT 400.01 bn
Non-NBR Revenue
5.5% Non-dev. BDT 630 bn External Financing
Expenditure BDT BDT 987.29 bn
4 Budget Highlights

Budget Highlights: Table-1: Budget Structure FY 2022-23 (BDT bn)

Bangladesh government has declared the national budget for Fiscal Year (FY) 2022-23 with Particulars FY‘23 R. FY‘22 FY'22
an expenditure estimate of BDT 6,780.6 billion (12.0% YoY growth) depending on Budget Size 6,780 5,935 6,037
expected revenue collection of BDT 4,330.0 billion (64% of total expenditure) and
borrowing of BDT 2,450.6 bn (36% of total expenditure) from internal and external % of GDP 15.2% 14.9% 17.5%
sources. Revenue Earnings (A): 4,330 3,890 3,890

The total allocation for non-developmental expenditure is estimated to be BDT 3,732 bn NBR Tax Revenue 3,700 3,300 3,300
(55% of total expenditure), while the allocation for ADP is BDT 2,460 bn. Agriculture & Non-NBR Tax Revenue 180 160 160
Rural Development, Communication Infrastructure and Human Resources have been given
the highest priority as 29.3% of ADP has been allocated to human resources sectors Non-Tax Revenue 450 430 430
(education, health and other related sectors), 28% to communication infrastructure and Public Expenditure (B): 6,780 5,935 6,037
22% to the agriculture sector (agriculture, rural development, water resources, and
related others). Nearly 33% of the projected revenue earnings will come from VAT, while Non-dev Expenditure 3,732 3,406 3,288
28% will come from income tax. Dev. Expenditure 2,596 2,219 2,371
ADP 2,460 2,099 2,253
The fiscal deficit is estimated to be BDT 2,451 billion (5.5% of GDP, up 19% from last FY).
40% of the deficit (BDT 1,096 bn) is expected to be financed from external sources and the Others 452 310 378
remaining 60% from domestic sources (BDT 1,063 bn, 43% Bank borrowing, 16% non-bank Budget Deficit (B-A): 2,451 2,045 2,147
borrowing). The Government has also proposed to keep the expenditure-to-GDP ratio at
15.2%. Financing:
Domestic Sources 1,463 1,243 1,135
The GDP growth target has been set at a staggering 7.5% and while the inflation target is
5.5%. To spur growth the government has proposed a reduction of tax for non-listed Bank Borrowing 1,063 873 765
companies to 27.5% from 30.0% and the rate for listed companies to 20.0% from 22.5% Non Bank 400 370 370
for FY22.
Ext. Borrowing 987 802 1,012
9 Individual Taxation (Unchanged)
Minimum Taxable Income for Individual Tax Payer Income Range (BDT) Applicable Rate
0 – 3 Lakh Nil
3 Lakh - 4 Lakh 5%
4 Lakh – 7 Lakh 10%
7 Lakh – 11 Lakh 15%
General Tax Women, Senior 11 Lakh – 16 Lakh 20%
Payer BDT Citizen (≥65 years) and 16 Lakh+ 25%
300,000 Third Gender
BDT As a part of relieving people from tax burden an to motivate people for better
350,000 tax-compliance, in proposed budget people from both lower and higher income
group slabs will continue to get 5% lower applicable tax rate from that of FY’20.

Net Wealth Surcharge % of Calculated Income Tax

Proposed Previous
Physically Challenged War-wounded
Net wealth upto BDT 3 crore- Nil
BDT 450,000 Freedom Fighters Unchanged
(Gazetted) Net wealth BDT 3 to BDT 10 crore- 10%
BDT 475,000 The provision of levying surcharge on Net wealth BDT 10 to BDT 20 crore- 20%
Tax free income thresholds remained unchanged this year as wealth has been annulled in case of no
well. Tax free ceiling has already been widened to facilitate Net wealth BDT 20 to BDT 50 crore- 30%
income.
investment and create employment opportunities as well as
Minimum surcharge on wealth has been Net wealth exceeding BDT 50 crore- 35%
to cope with growing inflation which remained unchanged repealed.
this year.
10 Changes in Corporate Taxation
Existing Proposed Existing Proposed
Type of Organization Rates Rates Type of Organization Rates Rates
Publicly Traded Company (Raised >10% Publicly traded Bank,
22.5% 20.0%* Insurance and FIs 37.5% Unchanged
of its Paid-up capital through IPO)
Public & Publicly Traded Company (Raised <10% Financial Non-publicly traded Bank,
Private of its Paid-up capital through IPO) 22.5% Unchanged**
Institutions Insurance and Financial 40.0% Unchanged
Institution
Non-Publicly Traded Company 30.0% 27.5%*
Merchant Bank 37.5% Unchanged

Other than One Person Company 25.0% 22.5%* All sorts of Tobacco 45.0% +
Tobacco Manufacturing Company 2.5%
Company Association of persons 30.0% 27.5%* Companies
Unchanged
(including cigarette, bidi, gul, (surcharge)
*All receipts and income must be transacted through bank transfer. Failure to do so will require existing
chewing tobacco)
tax rates for Publicly Traded Company that raised>10% of its Paid-up capital through IPO, Non-publicly
traded company, One Person Company and Association of persons Publicly Traded Mobile Operator 40.0% Unchanged
** 2.5% higher tax rates i.e. 25.0% will be applicable for Publicly Traded Company (Raised <10% of its
Telecom
Paid-up capital through IPO) Non-publicly traded Mobile
45.0% Unchanged
Operator Company
Private university, medical, dental
15.0% Unchanged
and engineering college
Corporate tax rate has been reduced by 2.5% for both Publicly traded and Non-publicly Traded Manufacturing Companies. Corporate tax rates of Banks,
Insurance, FIs and Merchant Banks, Tobacco Manufacturing Companies and Telecom Companies have been kept unchanged. However, government seems to
encourage transactions through banking channels and failure to do so will result in higher tax rates for the organizations. Moreover, tax rates for One Person
Company and Association of Persons have also been reduced with the same condition that transactions need to be done through formal banking channel.
12
Capital Market Impacts
Proposed Initiatives
• Corporate Tax rate: 2.5% lower tax rates of listed companies with 10% IPO size of total
paid-up capital.
• Tax on dividend income: Dividend income of the company remained unchanged at
20% but individual investors shall be taxed at their respective tax rates. Previously such
taxes were exempted up to BDT 50,000.
• Taxation on interest from government securities : Imposition of capital gain tax on
govt. securities which were previously tax free
• Returning capital flight: Initiatives to bring back undisclosed asset located abroad with
7% tax only, without any question.

Impact
• Increased profitability of listed companies having more than 10% IPO share/tradable
shares.
• Tax on dividend income for individual investors will discourage capital
market investments.
• Introduction of capital gain tax on govt. securities make it less attractive to invest in
govt. securities
• Option to bring back cash & equivalent undisclosed asset from abroad with 7% tax may
encourage injecting money flow in the economy.
13 Capital Market Impacts (Cont’d)

TAX CUTS FOR NON-RMG COMPANIES EXPORTING GOODS AND SERVICES

Policy Measures Impacted Companies

 APEXFOOD  BATBC
 APEXTANRY  CROWNCEMNT
 GEMINISEA  RENATA
 12% tax rate for all non-RMG companies exporting goods.  SPCERAMICS  SQURPHARMA
 10% tax rate for all non-RMG green industries exporting goods and services.  APEXFOOT  JMISMDL
 AMCL(PRAN)  BSRMSTEEL
 GPHISPAT  BSRMLTD
 BXPHARMA  PREMIERCEM
15 Positively Impacted Sectors
CONSTRUCTION
Policy Measures  Increase of import duty on winding wire of copper from 5% to 10%.
 Reduction in the supplementary duty from 45% to 0% on Wire Rod
 Rate of tax at source on supply of raw materials to manufacturers has and reduction in custom duty from 10% to 5% on M.S. bars & rods
been cut from 7% to 4% imported by electrode or wire drawing manufacturing industry
 VAT at the trading stage for M.S. products at Tk 200 per metric ton
instead of Tk 500 per metric ton
 Reduction of tax from 5% to 3% on import of HR coil and zinc, raw
materials used for manufacturing galvanized iron sheet or steel products Comment
 Reduction of import duty from 10% to 5% on Hot-Rolled Stainless-Steel
sheet as raw material  Reduction of tax at source on supply of raw materials to manufacturers
 Imposed 20% supplementary duty on imported GI fittings to ensure would improve the profitability of cement and steel products
protection of domestic industry manufacturers. Construction materials prices are expected fall and
 25 percent import duty on all imported Steel Pipes consequently, construction cost may fall and would benefit the real
 CD decreased from 10% to 5% for M.S. bars and rods imported by estate sector companies as well.
Industrial IRC holder  Tax incentives offered to industries producing galvanized iron sheet,
 VAT increased at manufacturing stage for MS products by Tk 200 steel products, and re-rolling mills will result in lower COGS and higher
per ton profit margins for the companies.
 The existing VAT exemption at the stage of production of Concrete  Local cable manufacturers will be more competitive.
Ready Mix has been withdrawn  Production cost of local electrode manufacturers will decrease.

Related Listed Companies: ARAMITCEM, CONFIDCEM,CROWNCCEMENT, HEIDELBCEM, LHBL, MEGHNACEM, PREMIERCEM, BSRMLTD, BSRMSTEEL,
SSSTEEL, DOMINAGE, ANWARGALV, AZIZPIPES, APOLOISPAT, GPHISPAT, RSRMSTEEL, SALAMCRST, BBSCABLES, COPPERTECH, LINDEBD
18 Positively Impacted Sectors
INFORMATION TECHNOLOGY
Policy Measures Comment
 Imposition of 15% on laptop computer import.  Domestic assembling and manufacturing of computers/ laptops, computer
 Withdrawal of existing 5% VAT exemption at trading stage of mobile phone sets. accessories, other related ICT products and cellular phones will increase.
 Increase the import duty on Cellular Phone Battery Charger from 15% to 25%.  IT freelancing company & It enabled service providers will enjoy tax benefits.
 Expansion of concessionary facilities for the import of computer accessories and
raw materials of ICT industry.
 New sectors including cloud service, system integration, e-learning platform, e-
book publications, mobile application development service and IT freelancing
have been declared tax free.

Related Listed Companies: WALTONHIL, GENEXIL, EGEN

FUEL & POWER and MISCELLANEOUS

Policy Measures Comment
 Further extension of existing 5% VAT rate for LPG Cylinder manufacturing  Bulk stage LPG purchase and sale will become less costlier.
for another year.  Service export sector will flourish.
 Exemption of VAT on first stage purchase of LPG in bulk, which will be sold
in bulk later.
 Exemption of the income earned in foreign exchange by ocean going
vessels carrying Bangladeshi flag from paying tax until 2030.

Related Listed Companies: BSC, MJLBD, LINDEBD

19 Positively Impacted Sectors
TELECOMMUNICATION
Policy Measures Comment
 VAT exemption on revenue sharing to BTRC against 4G mobile services  Dispute regarding VAT on revenue sharing to BTRC between BTRC
provided by mobile operators & operators will be resolved.
 VAT exemption at manufacturing stage for mobile phone batteries, chargers  Income from cloud based services will be encouraged
and interactive displays
 New sectors including cloud service, system integration, e-learning
platform, e-book publications, mobile application development service and
IT freelancing have been declared tax free.

Related Listed Companies: GP, Robi

20 Positively Impacted Sectors
TANNERY
Policy Measures Comment
 Extension of tax exemption facility to the import of raw  Raw material cost of the footwear manufacturing companies
ingredients used in the footwear industry. will decrease.
Related Listed Companies: APEXFOOT, BATASHOE, FORTUNE, LEGACYFOOT.

TEXTILE, KNITTING and DYEING

Policy Measures  Inclusion of Photosensitive Rotary Screen, Temperature Sensor
and Loaded PCB Board in the list of tax exemptions.
 Extension of 15% tax rate policy to June 30, 2025 which was
about to expire on June 30, 2022.
Comment
 Exemption of VAT on supply of goods under sub-contract
between the manufacturing units when both of them are  Profitability of RMG companies manufacturing through
enjoying boned facility. sub- contract will go up.
 Reduction of VAT on yarn made from man-made fiber and  Cost of Good Sold of RMG companies using Yarn made from man-
other fibers from BDT 6 per KG to BDT 3 per KG. made fiber will decrease.
 Overall production cost of RMG companies will receive a positive
 Continuation of cash incentives for RMG export. boost.

Related Listed Companies: Listed Textile Companies.

21 Positively Impacted Sectors
LIVESTOCK & FEED MILL INDUSTRY
Policy Measures Comment
 Reduction of import duty of Sugarcane molasses, a major  Reduced cost of raw materials due to reduction of import duty
ingredient for cattle feed, reduced to 10% from 15%. will lead an increase in profit margin of feed producing
 VAT exemption at trading stage to those animal feeds which companies.
are already enjoying exemption at import and manufacturing  Price of imported poultry farming equipment will reduce,
stage. resulting higher yield in livestock sector of the country.
 Continuation of zero tariff rates for the import of selective raw  Production cost of presticide producer will reduce, as a results
material for the sector. Additionally, 3 new materials (test kits of reduced cost of key imported raw material (Castor Oil,
for use in poultry, molasses feed grade and cane molasses Polyglycol, Solvesso , Genapol, Propoconazole Technical,
feed grade) used in livestock sector has been added to Dodecylbzols Acid, Branched CA-S Sol).
concession facility.
 Advance Tax exemption on import of machinery and
equipment by registered poultry farms.
 Advance Tax exemption on raw materials used in pesticides
production.

Related Listed Companies: AMANFEED, INDEXAGRO, NFML, ACMEPL and ACIFORMULA

22 Positively Impacted Sectors
AUTOMOBILE INDUSTRY
Policy Measures Comment
 Imposition of 100% supplementary duty in case of import of 4  Local manufacturers that will manufacture 2 wheelers above 250
stroke and 250% supplementary duty in case of import of 2 CC in the future will be more competitive.
strokes motorcycles above 250 CC.  Current local manufactures of 3 and 4 wheelers or the companies
 At 3 wheelers manufacturing stage, 5% VAT will be applicable and that will adopt local manufacturing of 3 and 4 wheelers in the
supplementary duty will be exempted on import of raw materials future will be benefited.
till June 30,2025.
 20 year tax holiday for 3 and 4 wheelers manufacturing firms with
investment amount above BDT 1,000 Million.

Related Listed Companies: RUNNERAUTO, IFADAUTOS

CERAMICS
Policy Measures Comment
 Reduction of custom duty from 15% to 5% on China  Local tiles & sanitary product manufacturers will benefit from
clays imported by tiles & sanitary products manufacturing industry lower cost of importing raw materials.
 Reduction of custom duty from 15% to 5% on Ball clays imported
by tiles & sanitary products manufacturing industry

Related Listed Companies: RAKCERAMIC, SPCERAMICS

23 Neutral to Positively Impacted Sectors

FINANCIAL (BANK, NBFI & MFS)

Policy Measures Comment
 Conditions that all receipts and income must be transacted  Bank transactions will increase due to the measures and their cost
through bank transfer and all expense and investment over BDT of fund too will reduce due to the improvements in CASA ratio.
1.2 mn must be made through bank for enjoying lower tax rates.  Excluding MFS service charge from tax deduction at source will
 Service charge of Mobile Financial Services (MFS) is proposed to help MFS providers to improve their profit margins and financial
remain out of tax deduction at source. Besides, consideration of inclusion initiatives will help MFS providers to increase the
invoice issued by the Mobile Financial Service (MFS) as VAT invoice number of active users.
in case of payment of electricity bill & interoperability of  Written-off bad debt except for individuals will be now considered
transactions between MFS service providers will increase their as taxable income for the concerned loan defaulter. Which may
usage. discourage loan defaults to some extent.
 Corporate Tax Rate remained same which was revised in 2019-20  Banks, Insurance and FIs are already exposed to higher tax rates.
(for listed financial sector companies to 37.5% and non-listed Hence, unchanged tax rates which has long been cherished may
companies at 40.0%). make it difficult to continue profit growth.
 Excise duty for bank balance above 50 mn (at any point of time)  Increased excise duty on bank deposits above 5 crore may
will be BDT 50,000 instead of BDT 40,000. discourage depositors to keep deposits above that amount.
Moreover, capital gain tax on govt. securities will decrease
investment income from those securities.

Related Listed Companies: All the schedule banks and banks with MFS i.e. BRACBANK, DUTCHBANGL, TRUSTBANK, UCB, etc.
24 Neutral to Negatively Impacted Sectors
CONSUMER ELECTRONICS
Policy Measures  Increase in import duty to 5% from 1% on Lifts and Skip Hoists.
 Extension of existing VAT exemption facility for production of
 Withdrawing full exemption and imposition of 5% VAT at the local compressors of refrigerators and freezers till June 30, 2025.
manufacturing stage on refrigerators and freezers and to continue  Reduction in the custom rates for the import of LED Light’s
existing exemption facilities on imported and local purchase of materials.
raw material and equipment till June 30, 2023.
 Existing exemption facility has been expanded to the import of
raw materials used in producing refrigerator and air conditioner Comment
compressor, washing machines, and television.  The overall production cost in local manufacturing of refrigerators
 Reduction in the custom duty from 25% to 10% on Winding wire and freezers will go up.
of copper imported by Industrial IRC holder VAT compliant  Cost of local compressor manufacturing will go down.
transformer and compressor manufacturing industry.  Cost of local manufacturing of LCD/LED TV will decrease.
 Reduction in custom duty from 25% to 10% on Metal frames for  Local lift manufacturers will be more competitive.
LCD/LED TV panel imported by Industrial IRC holder VAT  Production costs will decrease for local LED lights manufacturers.
compliant TV manufacturing industry.

Related Listed Companies: SINGERBD, WALTONHIL, BDLAMPS