Ministry, cos want VAT on internet value chain services to be cut to 5pc

Jasim Uddin | Published: 00:00, Oct 24,2019

 
 

A file photo shows a man browsing internet on a computer in Dhaka. The posts and telecommunications ministry and the country’s internet infrastructure companies have requested the finance ministry and the National Board of Revenue to reduce the value-added tax on internet-related value chain services. — New Age photo

The posts and telecommunications ministry and the country’s internet infrastructure companies have requested the finance ministry and the National Board of Revenue to reduce the value-added tax on internet-related value chain services.

The cost of internet services at the consumers’ level may increase by 30-40 per cent if the revenue board does not reduce VAT on value chain services provided by International Terrestrial Cable (ITC), International Internet Gateway (IIG) and Nationwide Telecommunication Transmission Network (NTTN), they said.

The government in the current fiscal year 2019-2020 increased the VAT on ITC, IIG and NTTN services to 15 per cent from 5 per cent.

VAT on internet services has been kept unchanged at 5 per cent.

Earlier in January, 2019, the NBR cut the VAT to 5 per cent from 15 per cent to reduce the cost of internet use and avoid rebate-related complexities following demand from the companies, mobile operators and the posts and telecommunications ministry.

In last year, the NBR had initially cut the VAT to 5 per cent on internet services while the VAT on ITC, IIG and NTTN, which are backward linkage services of internet service providers, remained at 15 per cent.

But the cost of internet did not come down as mobile operators and other internet service providers could not take rebate on previously paid 15 per cent VAT on ITC, IIG and NTTN services due to differences in VAT rates.

In this context, the NBR in January, 2019 reduced the VAT for the infrastructure companies and make the rate 5 per cent for all internet-related services.

Posts and telecommunications minister Mustafa Jabbar, in a recent semi-official letter to finance minister AHM Mustafa Kamal, said that the government in FY19 reduced the VAT on ITC, IIG and NTTN to avoid complexities and reduce the cost of internet.

He said that the same complexities surfaced again due to different VAT rates for internet services and value chain services.

Internet service providers and mobile operators require services from these three sectors to reach the internet services to the end users.

‘The cost of internet at consumers’ level is again increasing by 30 per cent to 40 per cent due to the differences in VAT rates,’ he said.

VAT rates should be set at 5 per cent for all levels of value chain to facilitate reduction of the cost of the internet services, he said.

The finance ministry forwarded the letter to the NBR for its consideration.

The Internet Service Providers Association of Bangladesh (ISPAB) has also expressed its concern over the issue.

The ISPAB will hold a meeting with the revenue board today on the issue as the internet services have become costlier due to rise in VAT.

The cost of internet services has again increased by 36 per cent as the ISPs cannot claim rebate of the VAT paid at 15 per cent in each stage of value chain, industry insiders said.

Companies paying VAT at reduced rate such as 5 per cent cannot claim rebate for VAT previously paid for each value chain.

If VAT rate is not cut, prices of internet services will be increased, they said.

Officials of the revenue board, however, said that reduction in VAT rate on the services of internet infrastructure companies did not help in reducing the cost of internet services at the consumers’ end.

Consumers were hardly benefited from the reduction in VAT on ITC, IIG and NTTN as in most cases there were no cut in monthly internet bills by internet service providers, they said.

They said that NBR would incur Tk 1,300 crore losses in revenue a year if VAT rate was cut for the services though there was hardly any possibility that consumers would get benefit in terms of reduction of internet prices.

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