The National Board of Revenue has rejected a request made by the posts and telecommunications ministry and the country’s internet infrastructure companies to cut the value-added tax on backward linkage facilities for internet services. The revenue board in a letter to posts and telecommunications minister Mustafa Jabbar on Tuesday expressed reservations about reducing the VAT on the services, saying that it would not yield any positive results for internet subscribers and might affect revenue mobilisation negatively. The NBR’s VAT wing has also informed the internet infrastructure companies about its decision. In September 2019, the minister and the companies requested the finance ministry and the NBR to reduce the VAT on internet-related value chain services provided by the International Terrestrial Cable (ITC), the International Internet Gateway (IIG) and the Nationwide Telecommunication Transmission Network (NTTN) to 5 per cent from current 15 per cent. Jabbar also sent a semi-official letter to finance minister AHM Mustafa Kamal at the time requesting him to consider the proposal. Jabbar and the internet infrastructure companies had argued that the cost of internet services at the consumer level might rise by 30 to 40 per cent due to imposition of a 15-per cent VAT on ITC, IIG and NTTN sectors. The VAT rate on the value chain should also be reduced to keep the cost of internet services at an affordable level, they claimed. The NBR in the budget for the current fiscal year 2019-2020 increased the VAT on the sectors from 5 per cent to 15 per cent, which was reduced in January 2019 after reduction of the VAT on internet service providers and mobile operators to 5 per cent. However, the VAT on internet services was kept unchanged at 5 per cent. VAT officials said that the NBR declined to offer the VAT benefit to the infrastructure companies after evaluating the impacts of previous reductions at the consumer end. A reduction in VAT on the services in the last FY2019 did not help to reduce the cost of internet at the consumer end, they said, adding that in most cases, there was no cut in monthly internet bills charged by the internet service providers. They also said that it might put a negative impact on the overall revenue mobilisation. According to a previous estimation made by the NBR, annual revenue losses would amount to around Tk 1,000 crore if the benefit was given. A reduction in the VAT rate will also create complexities in settling the VAT rebate issues, they added.
