The government has hiked the supplementary duty on mobile top-ups alongside VAT on SIM cards, pushing up costs that will be incurred by mobile and internet users, which will inevitably put a financial strain on access to essential services.

The supplementary duty has been raised from 15 percent to 20 percent in the proposed budget for fiscal year 2024-25.

This means that out of every Tk 100 top up of a user, the government will directly take Tk 28, which includes a 15 percent VAT and a 1 percent surcharge, whereas the government previously took Tk 25.

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Tax burden to get heavier, life even harder

Meanwhile, the VAT was increased by Tk 100 to Tk 300 for every SIM.

The new duty rate on the telecommunication sector will exacerbate the woes of an already heavily taxed industry to unprecedented fiscal heights, potentially exerting adverse effects on digital services.

This measure threatens to escalate the cost burden on consumers and service providers alike, hindering accessibility to mobile services and impeding digital inclusion efforts, according to experts.

"The National Board of Revenue's [NBR's] decision to extend tax exemption by another 3 years for 19 digital services, including the software sector, was commendable," said Fahim Mashroor, a former president of the Bangladesh Association of Software and Information Services (BASIS).

"However, I think imposing 5 percent extra supplementary duty on mobile internet is contradictory with the Smart Bangladesh vision," he said.

"It will further widen the digital divide. Use of smartphones and data by low-income people will be affected. So, the government should reconsider. Supplementary duty can only be imposed on talk time, but not data purchase," he added.

The mobile telecommunication sector is already burdened with high taxes, said Shahed Alam, chief corporate and regulatory officer at Robi Axiata.

An additional increase in the supplementary duty of various services in the mobile telecommunication sector will have an adverse impact on customers as well as the overall consumption of mobile internet services, he said.

Especially when the number of mobile internet users has been declining for the past few quarters, the increased tax burden will further accelerate the negative trend.

"We think that the overall objective of increasing the tax rate will not be attained as it will reduce the amount of total mobile consumer spending," Alam said.

"We must remember that in the journey towards building a Smart Bangladesh, 41 percent of the country's population still remains unconnected to telecommunications services," he added.

Besides, compared to neighbouring countries, data usage in Bangladesh at the consumer level is significantly low. So, there is a huge opportunity to increase revenue from this sector by increasing the number of users, Alam said.

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Budget Snippets

Bangladesh had 19.37 crore active mobile phone connections as of April this year, according to data of the Bangladesh Telecommunication Regulatory Commission.

The Association of Mobile Telecom Operators of Bangladesh, said in a statement that additional supplementary duty on mobile services would further burden the telecom industry and mobile subscribers.

This increase will raise the cost of voice and internet services, putting financial pressure on users, particularly those from marginalised communities, and potentially lead to decreased mobile service usage.

"This reduction in usage will negatively impact businesses and reduce government revenue," it said.

Amtob also said the higher VAT on SIM cards will discourage new users, slowing the growth of mobile connections in the country.

"These moves will result in slowing down the overall digitalisation of the country, which will not only have an impact on GDP growth, but also contradict the Smart Bangladesh vision," it said.

"So, we urge the government to reconsider these duties and take into account budget recommendations the telecom sector provided earlier," the association added.