Govt may offer another 3-year tax exemption for IT sector

Infographics: TBS

The government is planning to provide another three-year tax exemption for the IT sector with the condition to ensure cashless transactions aiming to support the government's vision of Smart Bangladesh and transforming the country into a prosperous, developed, and technologically sophisticated nation by 2041, according to the Finance Ministry officials.

In line with the vision, the upcoming budget will offer tax exemption to four new services — AI-based solution development, Blockchain-based solution development, Software as a service and Data science with digital data analytics.

Besides, the government has also taken the initiative to tighten the current Customs Baggage Rules to prevent any misuse.

The Finance Ministry officials mentioned that there are currently 27 IT-enabled services enjoying tax exemption. In the upcoming budget, the number of services will be reduced to 19. 

Of them, nine IT-enabled services will be merged into four services and seven other services will be scraped from the tax exemption list, according to the ministry officials.

The scraped services are — nationwide telecommunication transmission network, IT process outsourcing, website hosting, overseas medical transcription, search engine optimisation service, cloud service and system interrogation.

However, IT sector business leaders said if the government scrapped some services from the list, it would create some challenges in achieving the smart Bangladesh vision as web hosting and cloud-related services are very important for the country, and every company is dependent on these services.

Besides that system interrogation service requires some hardware imports but if it is removed from the list, the cost of the service will go up.

Russell T Ahmed, president of the Bangladesh Association of Software and Information Services (BASIS), told TBS, "It is a very positive move by the government to give another three-year tax expiation despite the push from the IMF."

He also mentioned that it would be not fair to evaluate the IT industry through its direct contributions to the economy, as the industry supports every other sector including Agriculture, he added.

The IT sector is the stimulating factor of Smart Bangladesh, Russel said, adding: "It will make the economy more robust."

Tightening the Customs Baggage Rules

No more duty-free smartphones: In the upcoming budget, the National Board of Revenue plans to tighten the Customs Baggage Rules to limit the duty-free allowance for travellers entering the country with new mobile handsets and gold ornaments.

Under the Baggage Rules, international passengers are permitted to bring in up to two brand-new smartphones and two used phones.

However, the rules do not allow duty-free entry of more than one unit of any other item.

Finance Ministry officials said under the planned regulations, travellers will be allowed to carry a maximum of one brand-new phone by paying duty, which is subject to the handset's value.

This measure aims to boost the local mobile manufacturing industry, diminish unauthorised handsets in the market, combat smuggling, and encourage imports via official channels, they said.

The officials further explained that for smartphone prices up to Tk30,000, the duty will be Tk5,000, and for up to Tk60,000, the duty will be Tk10,000.

On the other hand, when the new phone's value will be above Tk60,000, the duty will be Tk25,000.

However, local phone manufacturers prefer banning the existing unauthorised handsets in the country over changing the baggage rules as the latter will not significantly benefit local industries.

Rezwanul Hoque, CEO of Ismartu Technology BD Limited, a leading mobile phone manufacturer in the country, told TBS that the new move will help prevent unauthorised handsets.

However, to effectively deal with unauthorised handsets, the government should implement the National Equipment Identity Register (NEIR), he said, adding: "Around 50% of the current market is dominated by unauthorised handsets."

Rezwanul further said following the massive devaluation of the taka, the country has become a major destination for refurbished and second-hand handsets as they are cheaper than new ones.

On the other manufacturing industry facing challenges to operate their plants as their production comes down at 50%, he added.

Changes in the definition of gold ornaments: Ministry officials said to prevent misuse of the Baggage Rules, the NBR proposed changes in the definition of gold ornaments, making up to 22-carat gold ornaments standard instead of the currently allowed 24-carat.

Travellers under the age of 12 years will not be allowed to bring gold, cigarettes or alcohol from the next fiscal year.

Masudur Rahman, vice president of the Bangladesh Jeweller's Association (Bajus) welcomed the plan.

He told TBS that the duty-free ceiling of ornament carried by travellers should be 50 grams from the current ceiling of 100 grams. Otherwise, changes in the gold ornaments definition will not bring any positive impact to prevent smuggling.