Withholding tax on gold supply slashed to 0.5% to boost industry

The government has proposed reducing the withholding tax rate on the supply of gold and gold jewellery from 5% to 0.5% in a move aimed at bringing the industry into the formal sector as well as increasing revenue collection.

Finance Minister Amir Khosru Mahmud Chowdhury made the proposal while placing the national budget for the fiscal year 2026-27 in Parliament on Thursday.

The minister said due to the high rate of withholding tax, the supply of gold and gold jewellery has largely remained outside the formal economy, resulting in a loss of government revenue.

He also proposed replacing the existing 5% value-added tax (VAT) on jewellery services with a Tk2,500 per bhori tax to simplify the taxation system.

A business-friendly budget Industry insiders have highly appreciated the government’s move to significantly reduce the source tax on the supply of gold and jewellery.

“This is a highly business-friendly budget that contains a series of positive measures for the jewellery sector. If implemented, these initiatives will significantly strengthen the industry’s prospects for recovery and growth,” Bangladesh Jewellers’ Association (BAJUS) President Enamul Haque Khan Dolan told Daily Sun.

He said the most important issue is the proposed change in the VAT structure on gold. In the past, high VAT rates caused a significant loss of customers, as buyers in countries such as Dubai and Singapore benefited from VAT refund facilities. 

“In Bangladesh, VAT on gold previously stood at around Tk12,000-Tk15,000 per bhori. The new proposal introduces a much lower per-bhori tax. If implemented, this will help bring back a large number of customers who purchase gold abroad to local showrooms,” said the BAJUS president.

New moves to triple revenue collection

Enamul Haque said the new VAT structure would significantly increase government revenue by expanding the VAT net and ensuring compliance, benefiting consumers, businesses, and the government alike. He also welcomed the reduction of source tax from 5% to 0.5%, saying businesses previously faced difficulties in paying the tax due to procedural complexities. With the new rate, 100% compliance in source tax payment would be possible, he added.

The BAJUS president, however, called for further policy reforms, particularly in the modernisation of import and export regulations. “We have already begun discussions with the Ministry of Commerce in this regard. We hope that a modern and updated gold policy will soon be formulated, which will further facilitate imports and exports,” he said.

Diamond sector requires similar policy support

The BAJUS president also called for a similar policy framework for the diamond sector. Due to high duties and taxes, diamond imports remain negligible, resulting in minimal revenue for the government, he said.

He advocated bringing the gold and diamond sectors under a unified policy framework.

The BAJUS president said there are around 40,000 jewellery businesses across the country, directly and indirectly supporting the livelihoods of approximately 28 lakh people. Therefore, the development of this industry is critically important for the national economy.

“We maintain a zero-tolerance policy on smuggling. We are committed to bringing this industry fully under a legal, transparent and accountable framework,” he added.