The National Board of Revenue (NBR) has launched a drive to recover around Tk 80 billion in outstanding value-added tax (VAT) by December 2026, targeting businesses with arrears exceeding Tk 5.0 million under a newly introduced one-time settlement scheme.
According to an internal document of the VAT Implementation Wing, the revenue authority has identified around 650 large businesses with combined VAT arrears of nearly Tk 100 billion, most of which are tied up in cases pending before the High Court.
The recovery initiative follows the introduction of a one-time VAT arrear settlement facility under the Finance Act, 2026, allowing businesses to settle long-pending VAT dues, penalties and interest within six months from July 2026.
Under the scheme, businesses that pay the full principal amount of VAT arrears within the stipulated period will receive a waiver of all accumulated interest, except that accrued during the most recent 24 months.
President of the Foreign Investors' Chamber of Commerce and Industry (FICCI), Rupali Chowdhury, welcomed the first-ever legal provision allowing businesses to settle longstanding VAT arrears.
However, she expressed concern over whether businesses would be able to pay the outstanding dues in a lump sum, suggesting that the VAT authority consider allowing payment in instalments.
Ms Chowdhury also urged the VAT Implementation Wing to assess whether businesses with unpaid dues are financially distressed, whether they remain profitable, or whether the applicable VAT rates are disproportionately high relative to their business volumes.
A senior VAT official said taxpayers must pay the principal amount together with interest for only the most recent 24 months to qualify for the facility.
"We have primarily targeted disputed cases pending before the High Court that have blocked a substantial amount of VAT revenue since the VAT Act, 1991," the official told The Financial Express.
The Large Taxpayers Unit (LTU-VAT) has already held meetings with major corporate taxpayers to explain the new provision and encourage them to settle their outstanding liabilities, he added.
However, field-level VAT officials said some aspects of the provision remain unclear. In particular, the law does not specify how taxpayers who have already paid the principal amount but still have outstanding interest liabilities will be treated.
"It is not clear whether such businesses will also be eligible for a waiver of all interest except that accrued during the last 24 months," one VAT official said.
Tax expert Snehasish Barua, Partner at Snehasish Mahmud & Co., said the measure presents a significant opportunity for businesses with VAT disputes relating to the period up to June 30, 2022.
"In many cases, accumulated interest has already exceeded the principal tax amount, although the current law caps interest at 48 per cent of the principal," he said.
He suggested that the NBR proactively identify eligible cases and contact the respective companies to encourage them to take advantage of the scheme.
"This initiative will enable the government to recover not only the principal amount but also the applicable interest," he said.
Barua also pointed to a legal gap in the settlement mechanism.
"If a company withdraws its appeal before an appellate forum and the concerned VAT Commissioner does not accept the settlement, the taxpayer will be left without a clear legal remedy," he said.
He recommended that the NBR issue detailed settlement procedures, as the Finance Act does not clearly set out the implementation framework.
Under the new provisions, no interest or additional charges will apply to VAT dues of manufacturing industries relating to the period before July 1, 2010. The provision applies only to goods, not services.
For arrears arising under the repealed VAT Act, 1991, taxpayers will be allowed to settle outstanding dues by paying the principal amount together with simple interest at 2.0 per cent per month.
For dues arising under the VAT and Supplementary Duty Act, 2012, the statutory interest rates applicable for the relevant year will apply.
All eligible businesses will be entitled to the newly introduced interest waiver, a long-standing demand of the business community.
Officials said this is the first time the government has introduced a comprehensive VAT amnesty aimed at unlocking long-pending disputed revenue and reducing the large number of VAT cases pending before the courts.
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