Metro passengers exempt from VAT for a year

Passengers using Dhaka's metro rail system, a fast-growing and essential public transport service, have been exempted from paying Value Added Tax (VAT) on all types of metro rail services. 

The National Board of Revenue (NBR) announced that this exemption will remain effective until December 31, 2025.

The announcement was made through a special order signed by Barrister Md Badruzzaman Munshi, NBR’s Second Secretary (VAT Laws and Rules), on Monday (January 6).

The metro rail, described as "the most modern and popular public transport in Bangladesh," plays a critical role in reducing traffic congestion and saving working hours in Dhaka.

The NBR emphasised that to enhance the popularity of the metro rail and make it more accessible, travel costs need to be kept affordable.

The VAT exemption has been granted under sub-section (3) of section 126 of the Value Added Tax and Supplementary Duty Act, 2012 (Act No. 47 of 2012). This measure aims to support the "fast, safe, time-saving, environment-friendly, and remotely controlled state-of-the-art technology-based transport system."

The VAT exemption is effective immediately and will remain valid until December 31, 2025, providing metro passengers with financial relief and encouraging greater use of this sustainable transport option.

According to the current VAT law, a 15% VAT is applicable on air-conditioned rail tickets. However, since the launch of the air-conditioned metro rail system, this tax has been waived at the request of its operator, Dhaka Mass Transit Company Limited (DMTCL).  

The National Board of Revenue (NBR) initially sought to impose VAT on metro rail tickets starting in 2023. On January 22, 2023, then Commissioner of Dhaka South VAT Commissionerate, Shawkat Ali Sadi, sent a formal letter to DMTCL, urging the imposition of VAT. This was followed by several discussions with metro rail authorities. Despite these efforts, the NBR ultimately decided not to proceed with the VAT implementation.  

In May 2023, the NBR issued a notification waiving VAT on metro rail tickets until June 2024. This facility was later extended, providing continued relief to passengers.  

Insiders suggest that VAT imposition on metro rail services was considered after the 2024 national budget. However, the NBR has yet to issue any official directive or order regarding this matter, leaving the VAT exemption in place for now.