Operators yet to cut VAT on internet use

No internet service provider, including the mobile operators, has lowered the value-added tax at the end user level even though the government has slashed the tax burden by about 66 percent for customers from July 1.

In contrast, when the government imposed supplementary duty on mobile services two years ago the operators scuppered to implement it, with the levy taking effect within hours. 

In the budget for fiscal 2018-19 the government lowered the VAT on internet usage to 5 percent from 15 percent to meet a longstanding demand of the ICT sector.

This means, the operators were legally obliged to apply the reduced VAT from the early hours of July 1.

The reason for the delay in implementing the new tax structure is that ISPs are complaining that it will increase their cost of doing business by about 10 to 12 percent; they will request the government to reconsider the move.

In the previous structure, the service providers used to collect 15 percent VAT from customers and simultaneously got about 10 percent rebate, said MA Hakim, president of Internet Service Providers Association Bangladesh (ISPAB).

“But under the new structure we will not get such facility. And that's why we are not offering customers any rate cut yet.”

ISPAB will meet with Telecom Minister Mustafa Jabbar tomorrow, he added. Jabbar was not available for comment on the issue.

Meanwhile, the mobile operators said they are not reducing the VAT at the end user level yet as the order is not clear.

The Association of Mobile Telecom operators of Bangladesh on Sunday also sent a letter to the National Board of Revenue to get a clarification from them.

In its letter they said the order is applicable for internet organisations; they are proving internet service by using SIM cards with a different service code.

No mobile operator went on record about the matter.

However, a senior official of the NBR said there are no confusions and nothing to clarify about the order.

“We know the operators will try to find out ways to avoid taxes. This was a good revenue source and the users were also habituated to paying this sum,” he added. The government earns about Tk 1,100 crore from VAT on internet usage every year.

In the last seven years the information communication industry has tried to lessen the tax burden on internet usage, saying it will give a boost to digital services. And this time their wishes were finally answered.

As of May, there are 8.11 crore active mobile internet connections and 56.82 lakh broadband connections, according to the telecom regulatory commission.