New VAT Evasion Tactic in Cigarette Sector: Tk 72.5 Billion Revenue Evasion Unearthed

The VAT Intelligence and Investigation Directorate has uncovered an alleged scheme involving the use of used and counterfeit tax stamps and banderoles to manufacture cigarettes and supply them to the market without proper VAT invoices at a cigarette factory in Gazipur.

According to the Directorate, preliminary investigations have revealed an estimated Tk 7.25 billion in revenue evasion in the form of unpaid Value Added Tax (VAT) and Supplementary Duty.

A preventive team of the Directorate of Audit, Intelligence and Investigation, VAT, Dhaka, conducted a surprise raid on Virgo Tobacco Ltd., located at 43/1, Kaultia, Post: BOF, Gazipur, on September 2, 2026, based on information received from a confidential source.

During the operation, the intelligence team seized various documents and materials from the factory. Preliminary scrutiny of the seized records and evidence indicated that the company had allegedly been involved in the unauthorised production and marketing of cigarettes while evading government revenue.

Two teams of the VAT Intelligence and Investigation Directorate simultaneously conducted raids at the cigarette factory and a nearby warehouse.

According to officials involved in the operation, the factory gate had been kept closed from outside while production activities continued inside. Despite repeated requests by the officials to open the gate, no one responded.

The intelligence team subsequently entered the premises by climbing over the boundary wall and found cigarette production underway inside the factory.

The team also noticed smoke coming from within the factory compound. Upon checking the source, officials allegedly found used banderoles and cigarettes bearing counterfeit banderoles being burned.

When the officials asked the company representatives to produce documents relating to the cigarettes being destroyed, they failed to do so. They were also asked whether approval had been obtained from the competent departmental authority for destroying the cigarettes and banderoles. The representatives reportedly confirmed that no such approval had been obtained.

The company's general manager, in a written statement, reportedly confirmed that approximately 5 million cigarettes bearing counterfeit banderoles had been destroyed by burning.

The intelligence team immediately seized the remaining burnt banderoles and other remnants as evidence.

A subsequent search of the factory and an adjacent warehouse/residential building led to the seizure of used stamps and banderoles, various raw materials used in cigarette production and three mobile phones.

Samples and empty packets of some foreign cigarette brands were also found at the premises. A detailed investigation into the matter is currently underway, officials said.

The Directorate's IT and Cyber Forensic Team subsequently examined the seized mobile phones. Investigators analysed chat histories, confidential messages relating to sales and photographs of accounts and transaction records.

According to the preliminary findings, the factory allegedly used both legitimate stamps and banderoles and previously used stamps and banderoles to secretly manufacture and market cigarettes.

The data analysis further indicated that a significant portion of the cigarettes produced at the factory had allegedly been supplied to the market without issuing the required VAT invoice (Mushak-6.3). These transactions were allegedly concealed from the company's primary accounting records.

Based on the seized products and the data and information recovered during the investigation, officials have initially estimated that the government was deprived of approximately Tk 7.25 billion in VAT and Supplementary Duty.

Legal action has been initiated against the individuals and the company allegedly involved in the incident under the Value Added Tax and Supplementary Duty Act, 2012, and relevant rules.

A case was filed on September 14, 2026, in connection with the alleged revenue evasion. The case number is 17/2026.

Meanwhile, further investigation is underway into the foreign-brand cigarette samples and empty packets recovered from the premises.

The VAT Intelligence and Investigation Directorate said its nationwide operations and intelligence activities would continue in line with directives from the National Board of Revenue (NBR) to protect government revenue, prevent the illegal production and marketing of tobacco products, and curb revenue evasion through the use of counterfeit stamps and banderoles.