No free online shopping

For the first time ever, the government is set to introduce 4 percent value added taxes on all online sales, which may give a negative signal to activities aimed at building a Digital Bangladesh, entrepreneurs said yesterday.

Finance Minister AMA Muhith, in his budget speech in parliament yesterday, said online shopping is now being recognised and established as a popular mode of trade.

“Although the sector is not exempted from VAT at the moment, no exact definition of this service is currently present in the existing VAT system.”

On the other hand, the finance minister proposed an income tax holiday up to June 2024 to attract foreign investment in Information Technology Enabled Services and Nationwide Telecommunication Transmission Network.

Industry insiders termed this situation as conflicting to building a Digital Bangladesh.

“We are mostly happy with the proposed budget but the tax on online trading will not bring any good for the industry,” said Shameem Ahsan president of Bangladesh Association of Software and Information Services (BASIS).

In their budget recommendations, Bangladesh Computer Samity (BCS) and BASIS had sought withdrawal of VAT from all sorts of e-commerce products for three to five years.

Currently, there are different tax slabs for different products in online shopping.

This tax will be an obstacle to the sector, said Razib Ahmed, president of e-Commerce Association of Bangladesh. “The e-commerce industry of the country has just started and this will be a huge burden.”

The finance minister also proposed 5 percent customs duty on imported computer software, with exceptions to database, operating systems and development tools.

He also proposed increasing the duty on LCD/LED panels for televisions and fibre optic cables. But the rate was not mentioned. 

On the other hand, he proposed reducing the duty from 25 percent to 10 percent on digital camera imports.

Mustafa Jabbar, former president of BCS, said a reduction in the tax on cameras will benefit the country, but he opposed the VAT on online shopping.

“I am also frustrated that there was no mention on the VAT on internet use.”

The finance minister proposed to fully exempt the existing VAT on electricity bills, procurement service providers and investors of the developers associated with building the High Tech Park.

The government increased allocations for the telecom and information communication divisions.

For the post and telecommunication division, the allocation has been proposed at Tk 2,371 core for fiscal 2015-16, rising from Tk 1,289 crore for 2014-15.

For the ICT division, allocation for the next fiscal year has been proposed at Tk 1,213 crore, rising from Tk 1,028 crore in 2014-15.

The numbers are satisfactory in terms of allocation, said Jabbar.

“We began with an allocation of only Tk 76 crore in 2009 for ICT and now, it has come close to Tk 3,500 crore -- this is an achievement for the industry.”

In his budget speech, Muhith said the government expects to establish 8,500 'Post e-Centres' by June 2017.

To provide internet to all, 11,000 kilometres of optical fibre cables are being laid in 1,006 unions in all the districts, he said in parliament.

A project has also been undertaken to establish networks to provide broadband internet services to the entire country, he added.

“We will soon increase the bandwidth capacity from 200 Gbps to 1,300 Gbps by connecting the country with the second submarine cable,” said the finance minister.

He also expects Bangabandhu Satellite-1 to be launched into space by 2016.