The prices of mobile phones are set to increase in the upcoming fiscal as the government proposed raising value-added tax (VAT) on local production of handsets.

From the upcoming fiscal year, there will be 2 per cent VAT for complete local production whereas there is no such tax at present.

There will be 5 per cent VAT for handsets that are produced with at least two components made locally, up from the existing 3 per cent.

There will be 7.5 per cent VAT on handsets that were assembled in the country with all imported components, up from the current 5 per cent.

These would be a further blow to the country's mobile manufacturing industry which is fighting a battle for survival due to difficulties in opening adequate letters of credit, a massive drop in sales and expansion of the grey market.

Fifteen companies, including Samsung, Oppo, Vivo, Xiaomi, Realme and Techno, so far set up mobile manufacturing plants in Bangladesh since 2017-18 fiscal year.