Consumers to bear the brunt

The government’s proposed increase in value-added tax (VAT) on imported laptops and mobile phones is bad news for consumers as they would have to carry the additional cost burden at the retail level, according to industry insiders.

The price of laptops and mobile phones may increase by 27 per cent and 20 per cent respectively, if the new VAT rate is implemented.

It would also impede achieving the government’s digitalisation vision and ensure $5 billion in targets from the export of software and information technology-enabled services (ITES).

The government on Thursday proposed a 15 per cent and 5 per cent increase in value-added tax (VAT) on imported laptops and mobile handsets for FY2022-23.

Finance Minister AHM Mustafa Kamal made the proposal in parliament, hoping that the new VAT rate would create a level playing field for local manufacturers and help promote domestic industries.

To protect local manufacturers and the brand “Made in Bangladesh” worldwide, the minister also proposed to expand the existing concession facility for the import of raw materials for computer accessories and the ICT industry.

The fresh 15 per cent VAT at the import stage would take the total tax on imported laptop computers to 31 per cent.

“It’s not the time to impose additional VAT because laptops have already seen a 10 per cent increase in recent times due to the rise in dollar value and freight charge. If the proposed VAT is imposed, the price hike rate will reach at least 27 per cent at the retail level”, said Subrata Sharkar, the president of Bangladesh Computer Samity (BCS).

He said, “The country’s market has a monthly demand of 2-2.5 lakh laptops and desktop computers, of which only 10-15 per cent is met by domestic manufacturers.”

“We haven’t yet reached the point where we can solely rely on domestic production,” he added.

“We should not discourage laptop imports if we want to encourage entrepreneurs and freelancers to set up shop in the country, as they require high-quality computers at reasonable prices,” he also added.

The minister has also proposed to withdraw the existing 5 per cent VAT exemption at the trading stage, with customs duty on mobile and other battery chargers increasing to 25 per cent from 15 per cent.

At present, smartphone imports are taxed at about 58 per cent, while the tax rate on locally assembled and manufactured handsets ranges from 3-27 per cent.

“The price of mobile phones has already risen by at least 10-13 per cent in recent days due to the rise in the value of the dollar. Now, the price of mobile phones will increase by at least 20 per cent if the fresh 5 per cent VAT is imposed,” said Zakaria Shahid, general secretary, Mobile Phone Importers Association of Bangladesh (BMPIA).

“Besides, local manufacturers are still charging higher for lower grade products compared to imported digital devices,” said Bangladesh Mobile Phone Consumers’ Association (BMPCA) President Mohiuddin Ahmed.

Meanwhile Posts and Telecommunications Minister Mustafa Jabbar welcomed the new VAT and tax benefits.

“Hopefully, the initiative will be a milestone for our local manufacturing industry”, he told The Business Post.

Speaking on the matter, Mustafa Jabbar said, “If our local laptops were not priced competitively, they could not survive in the market. These products are being exported to several countries. So, of course, our products are of good quality and have the ability to compete with any global brands. ”

“Moreover, I have directed the Bangladesh Telecommunication Regulatory Commission (BTRC) to establish its own testing lab to ensure that good quality mobile are coming into the market,” he added.