Star-rated hotel business running without licenses

Reza Mahmud :

Star-rated hospitality services are being offered by hotels in Dhaka’s posh areas without obtaining the necessary licenses.
These hotels are operating booming businesses under the guise of being star-rated establishments. As a result, the government is losing a significant amount of revenue in the form of unpaid taxes and VAT. At the same time, legitimate entrepreneurs in this sector are facing unfair competition. There is now a growing demand to bring such unlicensed star-rated hotels under the tax and VAT net. Experts believe that order must be restored in this sector.
According to the “Model Tax Schedule 2015,” there are specific provisions for collecting municipal taxes from 3-, 4-, and 5-star hotels operating under the jurisdiction of the Dhaka North City Corporation (DNCC).
However, in reality, many hotels are offering star-level amenities without obtaining official star licenses from the government’s Ministry of Tourism. As a result, they are able to avoid paying these taxes. According to the Ministry of Tourism’s website, currently, Dhaka has 9 licensed five-star hotels, 1 four-star hotel, and 10 three-star hotels. Yet, in practice, there are about 40 to 50 hotels within DNCC’s area that offer star-level services without any official star license.
Creative tax evasion tactics:
Owners of these unlicensed star hotels are reportedly evading taxes and VAT worth crores of taka each year. A manager of a luxury hotel in the capital, requesting anonymity, stated that most hotels offer three- or four-star quality services but only obtain one- or two-star licenses – thereby evading higher tax rates. According to the Hotel and Restaurant Regulations 2016, a hotel can qualify for star classification upon meeting 41 specific criteria. Many hotels meet these standards but intentionally avoid applying for licenses to make it easier to evade taxes.
However, National Board of Revenue (NBR) officials claim that there is no scope for tax or VAT evasion. Those offering star-level services without licenses and evading taxes and VAT will be identified and held accountable.
Recently, NBR Chairman Abdur Rahman Khan said after a VAT-related meeting that no scope will be left for tax and VAT evasion. The tax and VAT base is being expanded to boost government revenue. As such, entities currently outside the tax and VAT network will soon be brought into it.
Meanwhile, the Manager of a licensed star-rated hotel said, “We pay a fixed amount of municipal tax every month, but neighboring hotels offering similar services are not paying any taxes. They can therefore offer lower room rates, putting us at a competitive disadvantage.”
Md. Mohsin Haque Himel, General Secretary of the Bangladesh International Hotel Association (BIHA), told The New Nation, “The unchecked operations of unlicensed star-rated and falsely taken lower licensees hotels are making it difficult for honest businesses to survive, increasing unfair competition. To resolve this situation, all stakeholders in this sector must be brought under the tax net. He also called for a clear announcement in the upcoming 2025-26 fiscal year budget regarding this issue.
Allegations have been made that hotels such as Golden Tulip – The Grandmark Banani, Lakeshore Grand Gulshan, Lakeshore Suites Banani, Lakeshore Heights Gulshan, The Midouri by Lakeshore, Ascott The Residence Baridhara, Hotel La Vinci Kawran Bazar, Hotel Unique Regency Banani, Pearl Hotel Banani, Raintree Banani, Coventina Lake Suites, and Nascent Gardenia Residence are operating without proper licenses.