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Stricter tax rebate likely for phone industry

Cell phones, cashew nuts, & skincare products may get costlier
Hamimur Rahman Waliullah
26 May 2023 00:00:00 | Update: 26 May 2023 00:48:54
Stricter tax rebate likely for phone industry

Tax rebates provided to the mobile phone industry will likely become stricter, but there will be more tax breaks for some micro-part imports.

The government plans to increase duty on cellular phone raw material imports in a bid to encourage value addition by local manufacturers, and boost local and foreign direct investments (FDIs).

Mobile phone manufacturers currently pay 1 per cent duty on some raw materials, and 10 per cent for others. But this duty will likely be set to 5 per cent and 15 per cent respectively, say finance ministry sources involved in the formulation of the budget for FY24.

Industry insiders however point out that if this duty goes up, cellular phones will be costlier, and the sector will feel the squeeze.

Ministry sources say the government is increasing rebate facilities on micro-part imports in the budget for FY24 in hopes that manufacturers will have an easier time getting those components.

They added that the government provides rebate facility on raw material imports to encourage local manufacture of mobile phones, but most manufacturers are assemblers, and they are engaging in little to no value addition.

The government is optimistic that a stricter tax rebate policy will ensure at least 20 per cent value addition in the country’s mobile phone industry. This in turn will support the installation of more mobile phone plants, and greater employment opportunities across Bangladesh.

Bangladesh’s mobile phone industry – once completely dependent on imports – has turned into a behemoth thanks to policy support and the ingenuity of manufacturers, with locally produced handsets now meeting more than 70 per cent of the country’s annual demand.

Tax policies make local products much cheaper and help industry to grow more. At the same time, mobile phone manufacturing units in hi-tech parks enjoy a tax holiday for up to 10 years.

Bangladesh Telecommunication Regulatory Commission (BTRC) data reveals that the country produced around 3.42 crore handsets in 15 local plants, and imported another 1.52 crore phones in FY21. In imports, handset importers pay 38 per cent tax.

The current market size for Bangladesh’s mobile handset industry stands at around Tk 10,000 crore. Domestic production of phones rose 16.32 per cent in FY21 when compared year-on-year.

Bangladesh began its foray into the smartphone manufacturing industry back in October 2017, when Walton – a local conglomerate - inaugurated the country’s first ever smartphone and tablet manufacturing plant “Walton Digi-Tech Industries.”

Other local handset manufacturers are Fair Electronics (Samsung), Edison Industries (Symphony), Alamin and Brothers (5 Star), Carlcare Technology BD Ltd (Itel and Techno), Anira International (Yunstar), Best Tycoon (BD) Enterprise Ltd (Vivo) , Grameen Distribution (Lava), Banglatronics Technology Limited (DTC), Benli Electronics Enterprise (Oppo), Okay Mobile, and Mycell Technology Limited, Vibrant Software (BD) Ltd, DBG Technology BD Ltd, Linnex Electronics Bangladesh Ltd, and RFL Electronics Ltd.

Cashew nut, skincare products to be costlier

The government will likely hike import duty of cashew nut and skincare products in a bid to encourage more local production of such commodities, ministry sources told The Business Post.

Currently, there are 14 per cent – 89 per cent total import duties on cashew nuts.

Meanwhile, import duty on beauty, makeup, and skincare products will likely be set at 157 per cent. Importers currently enjoy lower duty on health and skincare products.