Proposed VAT raise on mobile handset to increase price burden

Finance minister`s proposal in the budget for imposing 15 per cent VAT (Value Added Tax) on mobile handset at the import stage will increase price burden on the customers, even it will impede the growth of digital Bangladesh, said the sector insiders.
They said mobile handset is the easiest medium for access to information and making people's life easier irrespective of urban or rural.
The government`s new step in this regard will also be a hurdle to digital Bangladesh which is the election pledge of the incumbent government.
However, many of them expressed their surprise over the proposal of increase in VAT on mobile handset from 10 per cent to 15 per cent to save the locally assembled product.  But, no one is assembling such product in the country, according to mobile handset importers.
"The proposal for raising VAT on mobile handset import without justification will slow down the growth of access to information and it will be against the government's vision," said Symphony Director Rezwanul Huq. Symphony is the largest mobile handset importer in the country.
He said, "We will talk to the government high- ups again and hope they will understand the impact of VAT on people's purchasing capacity".
Walton Mobile Division Head and Deputy Director S.M. Rejoan Alam Shiplu said if the proposal is passed then it will affect the local companies, especially the high priced mobile handset importers.
He told the FE that some businessmen who are involved in the 'luggage- based business' will be beneficiary of the proposed VAT.
According to him, in this case, the government is giving priority only to revenue increase, rather than thinking overall social impact of mobile phone.
The government is expecting to earn extra revenue amounting to nearly Tk 6.0 billion from the sector by increasing the VAT, according to the analysis of the handset importers.
The country imports more than 25 million units of handset a year.
Finance Minister AMA Muhith in his budget speech for fiscal 2014-15 said that the existing tax has created uneven competition between local assembling industries and importers.
Besides, the finance minister has proposed to impose a fixed tax of Tk. 100 on the supply of every single piece of replacement SIM. Currently, there is no such tax on the supply of replacement SIMs. In addition, there is a fixed tax of Tk. 300 on the supply of every single piece of SIM card by the mobile operators which will continue.
The minister said the new proposal of the tax was placed in order to ensure transparency. Otherwise it will cause inconvenience in revenue accounting, he added.
However, secretary general of the Association of Mobile Telecom Operators of Bangladesh (AMTOB) TIM Nurul Kabir opposed the proposal of the finance minister. He said it will create more inconsistency in tax collection.
Mr Kabir said if the budget proposal is approved, both the customers and operators will be the losers.