Mobile internet users hit hard by VAT hike

The burden of value-added tax (VAT) on mobile internet users is getting heavier as operators have started charging 15% VAT on data service from 1 July, the beginning of the new fiscal, instead of 5%.

The Association of Mobile Telecom Operators of Bangladesh (AMTOB) has sent a letter recently to the Bangladesh Telecommunication Regulatory Commission (BTRC) in this regard.

In the letter, AMTOB said, as per the Value Added Tax and Supplementary Duty Act, 2012, mobile operators were endorsed to collect 15% VAT in the prescribed manner but they were charging a reduced VAT rate.

"But due to the changes in the Finance Act, 2022, the mobile network operators have to collect and pay 15% VAT to the exchequer on data services with effect from 1st July 2022," reads the letter.

When asked, Subrata Roy Maitra, vice-chairman at BTRC, said that the issue is related to the National Board of Revenue (NBR). 

"The VAT increase will hit the consumers in the pocket. So, being the regulator of the sector, we will write to the NBR about the issue," he said.

Shahed Alam, chief corporate and regulatory officer at Robi Axiata Limited, said that the Value Added Tax and Supplementary Duty Act, 2012 was enacted to increase the collection of VAT with fairness. This law also ensured the availability of all types of rebates.

"In keeping with the basic principles of VAT and global standards, the 2012 Act (effective from 2019) imposed universal VAT at the rate of 15%. But it is a matter of great regret that since the enactment of the Act, VAT has been levied at a reduced rate, and the rebate has been limited by changing the definition of instruments," he said.

As a result, the effective VAT rate at the business level continued to rise. Businesses have to bear the burden of this additional tax, he said.

"Provision has been made in the Finance Act for the current financial year to cancel the VAT rebate or adjustment at a proportional rate. This means that even if there is a fair adjustment scope, VAT rebates will be revoked according to the type of service and the overall availability of rebates will be limited," he said.

"This will result in a much higher effective VAT rate, which we cannot afford. Not only that, the new law will increase the legal complexities of VAT. Due to which, from today, we have added VAT at the rate of 15% on all internet packages as per the relevant provisions of the VAT Act," he added.

At present, the number of mobile internet users in the country is 11.45 crore whereas the total number of internet users reached 12.55 crore in May.