Handset production: Bangladesh dreams of self-sufficiency in 2yrs

Bangladesh is optimistic about meeting 100% of its domestic demand through locally manufactured mobile handsets within the next two years, and to achieve this goal, local manufacturers requested an extension of the VAT exemption facility for this sector.

Addressing an event at the NBR conference room in Dhaka, Ruhul Alam Al Mahbub, president of the Bangladesh Mobile Phone Importers Association (BMPIA), said, "Local companies manufactured or assembled 85% of the domestic demand for handsets in 2020. This feat was possible in just five years due to the government policy support.

"We are currently getting VAT exemption facility and the tax exemption offered by high-tech parks. We now have the opportunity to become fully self-sufficient in this sector, as well as to boost handset exports in a number of countries across the globe, especially in Africa and Middle East."

The VAT exemption facility for manufacturers of mobile phones, refrigerators, air conditioners and other home appliances is set to end in June this year.

Mahbub, who is also the chairman of Fair Group, said at the pre-budget discussion for the FY2021-22 on Sunday that local handset manufacturers need the VAT exemption facility for at least the next two years.

According to the BMPIA, Bangladesh has an annual demand for 3.5 crore new handsets. Of them, 90 lakh are smartphones and 2.6 crore are feature phones. At present, factories in Bangladesh are supplying more than 75 lakh phones. However, a large volume of feature phones is still imported.

The association further revealed that the import of smartphones has been falling rapidly in the last few years. Until October last year, 9.5 lakh smartphones were imported, down from 81.68 lakh in 2017. Twenty-four lakh smartphones were imported in 2019.

Bangladesh is heading towards self-sufficiency in the sector thanks to a number of important steps, such as imposing duty on handset imports, granting tax holiday facility, and giving VAT exemption to local manufacturers.

Encouraged by such initiatives, nearly all big brands have established their handset assembling plants in the country. Which in turn provided a boost to the local handset manufacturers.

Sources from the NBR told The Business Standard that importers pay an overall tax of 57% for importing handsets, while local assemblers pay only 18%.

Present at the pre-budget discussion, Bangladesh Television Manufacturers Association President Md Sohel Khan recommended slashing tax on TV parts and cabinets from 25% to 15%.

Bangladesh Electrical Association President Shahadat Hossain sought tax exemption on imports of a number of parts and machineries, after terming them essential.

He recommended setting tax at 5% for importing automatic circuit breakers, 5% for LED tubes and bulbs, 25% for other switches, sockets and switch-socket parts, 1% for electric fan motors and 5% for urea resin.

 He also requested that customs duty and supplementary duty for electric room fans be set at 25% and 20% respectively in a bid to discourage imports.

Participating in the discussion, Bangladesh Computer Samity sought tax exemption on importing computer monitors with screen size up to 24-inch.

At the meeting, the Bangladesh Association of Software and Information Services (BASIS) demanded an extension of the tax exemption facility up to 2030 – instead of the current deadline 2024 – for software and ITES (information technology enabled services).

BASIS also requested the NBR to include a number ITES, including software as service, platform as service, cloud service, system integration, IT and ITES training and internet services in the list of tax exempted services.

The association then demanded a reduction in corporate income tax rate to 10% for internet service providers.

Revenue board Chairman Abu Hena Md Rahmatul Muneem said the NBR is committed to offer all-out support to manufacturers of high-value-added products for promoting industrialisation in the country.

But the board wants to be sure that the intended industries are utilising these benefits for their development, as there are cases of traders abusing these facilities to pay less taxes.

Earlier the same morning in a separate pre-budget meeting, the Institute of Chartered Accountants of Bangladesh (ICAB) submitted a 44-point proposal on income tax, 21-point on VAT and five recommendations on customs sector to the NBR.

In this event, The Institute of Cost and Management Accountants of Bangladesh (ICMAB) and Institute of Chartered Secretaries of Bangladesh reiterated nearly the same set of recommendations for the next budget.

NBR members Alamgir Hossain, Syed Golam Kibria and Masud Sadiq also spoke at those events.