VAT reduced on 4G mobile phone operation

In the latest move the government has cut paying valued-added tax (VAT) on 4G licence issuance and renewal fees by mobile phone operators.

The reduced rate of VAT has been fixed at 7.5 per cent from the existing 15 per cent on licence issuance and renewal of 4G mobile operation. The measure was taken to help generate more revenues from the sector.   

The mobile phone operators, however, seem to be not very happy over the measure.

The Chief Corporate and Regulatory Officer of Robi Axiata, Shahed Alam explained why. While speaking to this correspondent, he said, “The move is welcoming but the step would still create an additional cost burden for us as our right to claim VAT rebate has been revoked.” 

The National Board of Revenue (NBR) issued an order in this regard recently. The reduced rate of VAT on 4G licence issuance or renewal fees would come into effective retrospectively from July 1, 2019, said the NBR notice.

"NBR took the decision to cut the VAT rate on 4G licence issuance or renewal fees for the benefit of the telecom sector. We hope it will also help us get more revenue from the sector," said first secretary of NBR's VAT policy Kazi Farid Uddin.

Before this decision of the NBR, 15 per cent VAT was applicable on 4G licence issuance or renewal fees as per the VAT and Supplementary Duty Act 2012 that was made effective from July 1, 2019.

Now, after the reduction of the rate, no VAT rebate will be applicable, the NBR said, adding that it would not be possible to make 4G licences operational prior to the payment of the reduced rate of VAT on the licence fees, technology neutrality or spectrum fee, royalty or their renewals.

Shahed Alam also told Bangladesh Post that the NBR directive is silent on 2G and 3G related VAT payment. He said, "We believe, as a matter of principle, license fees and spectrum charges should not be subjected to VAT regulation as they are pure raw materials for the industry." 

"These raw materials create value for us only when we invest heavily on our network to serve our customers,” he added.

Earlier, on January 31, the revenue authorities offered VAT exemption to the telecom operators on the amount that they pay to the regulator as revenue-sharing as per the licencing provision.

As per the condition of 2G and 3G licences, the mobile phone companies share 5.5 per cent of their total revenue with the Bangladesh Telecommunication Regulatory Commission (BTRC).

The VAT wing of the NBR offered the exemption with retrospective effect from July 1, 2019.

The telecom companies will not have to pay 15 per cent VAT on the revenue-sharing amount, said the NBR order. Earlier, the mobile operators had to pay BTRC's share after paying the VAT.

Imposition of the VAT on the revenue-sharing portion arises double taxation, said the order. Earlier in 2013, the NBR had waived the VAT on revenue-sharing under the then VAT Act-1991.

However, the VAT has automatically been returned with the implementation of the new VAT and Supplementary Duty Act-2012 in July 2019.

It had created disputes between the telecom operators and the large taxpayers' unit (LTU) of the VAT wing. The LTU proposed to waive the VAT on revenue-sharing to avoid double taxation.