Published :
Updated :
For all latest news, follow The Financial Express Google News channel.
Local investors in the country's paint industry are deeply perturbed at the recent tax hike, fearing significant disruptions to their business plans midway through the year.
They have urged the government to reconsider the decision of the hike emphasising the need for support amid the current political and economic turmoil.
The National Board of Revenue (NBR) has recently raised the supplementary duty (SD) by 10 per cent on the import of raw materials and by 5.0 per cent on the supply stage of paint products.
This policy shift has alarmed local paint manufacturers, who warn of potential business losses, factory closures, and subsequent layoffs, exacerbating unemployment in the sector.
Md Mohsin Habib Chowdhury, president of the Bangladesh Paint Manufacturers Association, cautioned that the tax increase could lead to lower government revenue from the sector due to reduced consumption.
"The paint industry already experienced negative volume growth last year. High inflation has eroded consumers' purchasing power, further affecting demand," he said.
He also pointed out that the real estate sector, a major institutional consumer of paint, is currently facing significant challenges, which could further dampen industry prospects.
Mr. Chowdhury urged the government to recognize paint as an essential item for infrastructure development and to waive SD on all paint products.
Kamruzzaman Kamal, director (Marketing) at PRAN-RFL Group, highlighted additional difficulties faced by paint manufacturers in opening Letters of Credit (L/Cs) for importing raw materials, as the government categorizes paint as a luxury item.
"Paint is not a luxury product-it plays a crucial role in protecting assets and extending their longevity," he asserted.
Data from the World Corrosion Organisation said corrosion and erosion cost industrial nations between 1.0 per cent and 1.5 per cent of their GDP annually.
"Currently, the overall tax incidence on paint stands at 89 per cent, and the imposition of additional SD will push it even higher," Mr. Kamal added.
The paint industry has been subjected to supplementary duty for over a decade. Initially, SD was applied only to topcoat paints, but it has now been extended to primers as well.
The market is predominantly controlled by two major players, Berger and Asian Paints, with PRAN-RFL Group's Rainbow Paints following as a strong contender.
According to industry data, Bangladesh's per capita paint consumption is 1.4 kilograms-far lower than India's 3 kg, ASEAN countries' 7-10 kg, and China's 12 kg. While there is significant growth potential, the increased SD could discourage both consumers and businesses, ultimately hampering economic progress.
At present, 85 per cent of the country's paint consumption is met by local manufacturers, while the remainder is imported for specialized needs. The total market size exceeds USD 0.5 billion, with 36 companies operating in the sector, generating millions of jobs.
In the previous fiscal year, the industry contributed over Tk 11 billion in VAT and taxes, with Berger alone paying Tk 7.69 billion.
India's paint and coatings market is projected to reach USD 10.46 billion in 2025, while Pakistan's market size stands at USD 417.57 million, according to data from Mordor Intelligence.
Industry leaders continue to advocate for tax relief, emphasising that a well-supported paint sector is crucial for economic growth, employment, and infrastructure development.
Talking to the FE, a senior VAT official said it is not desired for them too to hike tax in the middle of the year, but they were helpless to meet growing demands for domestic revenue.
He, however, said the NBR has tried to exclude essential food items as much as possible to increase taxes.