Mobile handset importers have contradicted with the finance minister's budget speech saying that he actually proposed imposition of "fresh" 15 per cent VAT at import stage instead of increasing it from 10 to 15 per cent.
In his budget speech for the fiscal 2014-15, Finance Minister AMA Muhith said that there is already 10 per cent value added tax (VAT) on imports of mobile phones. Subsequently, he proposed to impose 15 per cent VAT, meaning that it will hike from 10 to 15 per cent.
However, the sector insiders said that at present there was no VAT on cell phones at import stage; rather, they have to pay only 10 per cent customs duty.
If the new proposal is passed in the parliament, they have to pay a total of 25 per cent levy at import stage.
Moreover, there was a proposal of introducing 5 per cent advance income tax (AIT) on the cell phone importers, some of them said, adding that then the total levy at the import stage will be 30 per cent.
"As a result of the imposition of fresh tax, prices of the handsets will be increased by around 20 per cent, eventually hindering the government's digitisation vision in the country," Rezwanul Huq, director of Symphony, largest mobile handset importer in Bangladesh, told the FE.
"Making the mobile phones largely available to the people is a precondition to the digital Bangladesh. Growth in the digitisation vision, the mobile banking and as such the financial inclusion will be seriously affected by the fresh tax," said Mr Huq, who is also general secretary of the Bangladesh Mobile Phone Importers Association.
Aside from the levy structure, the cell phone importers were also in variance with the financial minister's budget speech that "Some companies are assembling quality mobile phones in the country."
"They (assemblers) have to pay 15 percent VAT at the assembling stage. On the other hand, there is only 10 percent VAT on imports of mobile phones," Mr Muhith said.
With a view to removing this "uneven competition" between local assembling industries and imports, the minister proposed to impose 15 percent VAT on mobile phones at the import stage.
Contradicting with the information of the minister, the sector insiders said that on the one hand there is no VAT on imports of mobile phones at present; on the other hand there is no company in Bangladesh that assembles cell phones let alone "quality mobile phones."
"Till now, 100 per cent of the mobile phones in Bangladesh is imported," Mr Rezwanul Huq said adding that their business is very transparent.
A high official of another leading handset importer Walton said, "With the imposition of fresh VAT, the general customers will be affected." He preferred to be unnamed.
The VAT, imposed on the imported handsets, was withdrawal several years ago, as a result of which the cell phones were highly penetrated in the country, he said, adding that this growth will be negatively affected by the fresh VAT.
As likely impact of the hike in mobile phones' prices, he said that there might be increase in cell phone import through illegal means including luggage. He also apprehended about 'under invoicing' of the imported handsets.
The official, however, said that the prices might be hiked from 10 to 15 per cent. "It (range) will depend on mentality of the importers to make profit more or less."
In a query, the officials furthers said that if the government truly wants to encourage the local assembling of the mobile phones, it should withdraw the existing VAT on the assembled cell phones.
Saying that the taxes on import of different necessary parts, needed for assembling the mobile phones, is very high such as 61 per cent duty on batter import and 37 per cent duty on some other parts including charger, they sought withdrawal of the taxes to encourage the companies to assemble handsets and strengthen the potential industry in Bangladesh.
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