The National Board of Revenue has asked the country’s mobile phone operators to collect value-added tax on internet services at the reduced rate of 5 per cent from consumers as per the decision taken in the national budget for the current fiscal year of 2018-2019.
VAT wing of the NBR on Wednesday issued a clarification on the issue and asked private mobile operators Grameenphone, Robi and Banglalink and state-run Teletalk to implement the internet VAT cut decision of the government.
Earlier, on June 28, the NBR issued a statutory regulatory order reducing VAT on internet organisations to 5 per cent from the previous 15 per cent.
Internet organisations collect the VAT from consumers against internet services and deposit the tax to the government exchequer.
The Association of Mobile Telecom Operators of Bangladesh, however, refrained from collecting the VAT at the reduced rate arguing that the budgetary measure was not applicable for the mobile operators as they didn’t fall under the definition of internet organisations.
Mobile operators provide telecommunication services including internet and data services to their subscribers through cellular phone using SIM/RIUM card which comes under the ambit of service code 12.10 (telephone), the association claimed.
Mobile network operators also do not have internet service provider (ISP) licence from Bangladesh Telecommunications Regulatory Commission and do not provide any fixed line internet services, it said.
The AMTOB on July 1 sought clarification on applicability of internet VAT reduction on data or internet services provided to subscribers using SIM/RUIM.
Mobile operators also claimed that ultimately consumers would not be benefited from the VAT rate cut as operators would not be able to reduce the prices of internet services as they would not get rebate on previously paid VAT, which would cause a rise in the cost of doing business.
The NBR in its clarification, issued to AMTOB secretary general TIM Nurul Kabir, said, ‘MNOs would come under the definition of internet organisations as they provide internet and data services to subscribers through cellular phone using SIM/RUIM card.’
As per law, internet organisations are individuals, organisations or institutions who or which arrange data services and establish communications commercially through telephone, teleprinter, telex, fax or internet.
The NBR also sent the clarification letter, signed by its first secretary (VAT policy) Hasan Mohammad Tarek Rikabder, to managing directors of the four mobile operators requesting to take necessary steps to collect VAT at the rate of 5 per cent from subscribers as per the SRO.
NBR officials told New Age that the cost of internet use might reduce at the range of 3 per cent to 6 per cent due to the VAT rate cut.
They also admitted that the cost of doing business of mobile operators would rise significantly due to the VAT rate cut as they would not be able to get rebate against VAT paid in advance while purchasing of inputs like bandwidth.
Service providers can claim rebate against VAT paid in advance if only VAT is paid at standard 15 per cent rate and rebate is not applicable against the inputs for VAT at reduced rate also known as truncated rate.
The officials said that the VAT rate would also be 5 per cent for the purchase of bandwidth by the mobile phone operators from the nationwide telecommunication transmission network providers.