VAT Reform Urged for Food Sector

The Bangladesh Restaurant Owners Association has issued a strong call for urgent and comprehensive reform of what it describes as a fragmented and inequitable value-added tax (VAT) regime governing the country’s food service industry. The body argues that the current structure creates deep distortions across market segments, leaving formally registered establishments at a clear competitive disadvantage compared with informal operators.

Speaking at a press conference held on Friday at the association’s office in Purana Paltan, Dhaka, senior leaders outlined what they termed systemic “policy discrimination” affecting restaurants, catering companies, and street food vendors. The written statement was presented by Secretary General Imran Hasan, who said inconsistencies in taxation and regulatory enforcement were placing mounting pressure on compliant businesses already struggling with rising operational costs.

He noted that although the government has attempted to design a supportive budget under challenging macroeconomic conditions, persistent inflation and tightening liquidity within the banking sector have significantly increased the cost of doing business. In particular, he pointed to escalating prices of liquefied petroleum gas, electricity tariffs, and imported food ingredients as key contributors to financial strain, describing the situation as a “serious crisis” for the hospitality sector.

While acknowledging the efforts of policymakers in framing fiscal measures, he criticised the absence of targeted relief for food service enterprises, which he described as highly labour-intensive and particularly vulnerable to fluctuations in input costs and consumer demand.

A central issue raised by the association is the uneven application of VAT across different categories within the sector. Restaurants currently pay a 5 per cent VAT rate, whereas catering services are subject to a much higher 15 per cent charge. Meanwhile, a large share of street food vendors operate outside the formal tax system altogether, creating what the association considers an unsustainable imbalance in competition and compliance.

VAT Structure Highlighted by the Association

The association argued that extending VAT registration to all food service providers, including street vendors, would help establish a more level playing field while also broadening the government’s revenue base. It further warned that the existing partial compliance framework encourages informalisation, weakens regulatory oversight, and undermines long-term sectoral stability.

Beyond taxation, concerns were also raised over what the association described as excessive regulatory complexity. According to Imran Hasan, restaurant operators are often required to secure between ten and twelve separate licences from multiple government agencies before commencing operations. This fragmented approval process, he said, increases administrative costs, delays expansion, and reduces overall efficiency in enforcement.

To address these challenges, the association proposed the introduction of a dedicated one-stop service for the hospitality industry to streamline licensing, reduce duplication, and improve coordination among regulatory bodies. It also called for a standalone industrial policy for hotels and restaurants, integrating taxation, licensing, food safety, skills development, and investment facilitation into a unified framework.

Senior office-bearers present at the briefing, including Vice-President Shah Sultan Khokon, Joint Secretary General Firoz Alam Suman, and Organising Secretary Taufiqur Islam, reiterated the call for urgent structural reform. They warned that without decisive policy intervention, the sector risks declining profitability, reduced investment, and prolonged stagnation despite steadily growing consumer demand.