Staff Correspondent:

In the next fiscal year’s budget, the prices of refrigerators and air conditioners (ACs) are expected to increase. The proposed budget includes plans to double the Value Added Tax (VAT) rate on these locally manufactured products.

Currently, a 7.5% VAT is levied at the factory level on domestically produced fridges and ACs. According to sources at the National Board of Revenue (NBR), the upcoming budget may raise this rate to 15%. As a result, the prices of ACs and fridges at the consumer level could rise significantly.

The national budget will be presented on June 2. Economic Adviser Salehuddin Ahmed will announce the budget through a national address. The budget speech will detail the changes in tariff and tax structures.

According to several NBR officials, VAT on domestic products is generally imposed at the production level. If the proposed 15% VAT is implemented, producers will be able to avail input VAT rebate benefits, since most components used in manufacturing fridges and ACs are sourced from VAT-paid suppliers.

It is noted that until the 2023–24 fiscal year, the VAT rate on ACs and fridges was 5%. This was raised to 7.5% in the current fiscal year. Now, the government has made a policy decision to increase the rate again to 15%.

Currently, several companies including Walton, Electromart, Esquire, Transcom, Singer, Butterfly, Rangs, Minister, Vision, LG, and Electra International are actively engaged in domestic production and marketing of ACs and fridges.

According to industry insiders, nearly two-thirds of the AC market is now dominated by local brands. While foreign brands have some presence in urban areas, domestic brands have a strong hold in suburban and rural markets. The key reasons for this dominance are affordability, easy availability, and convenient service facilities.

Each year, an average of 600,000 to 700,000 AC units are sold in the country, and demand in this sector is growing rapidly. In contrast, annual fridge sales average between 2 to 2.5 million units, with Walton and a few other local companies maintaining leading market positions.

Industry experts believe that if the VAT rate is doubled, the resulting price hike could negatively impact consumer demand and the domestic appliance industry