Dhaka, Aug. 1 -- The government is rethinking its decision to impose a 7.5% VAT on the import of ocean-going ships, following strong backlash from local investors and concerns over potential damage to a booming foreign exchange-earning sector.

After promising tax exemptions until 2030, the sudden reversal last December caught ship owners and investors off guard, just as they were committing billions of dollars based on long-term incentives.

With around US$3.5 billion already in the pipeline, stakeholders now warn that the loss of fiscal support is discouraging further investment in an industry that has emerged as the country's second-largest source of foreign currency.

The National Board of Revenue (NBR), which introduced the VAT in De...