Pause before upgrading your phone! Mobiles have become more expensive
The VAT burden on mobile handset manufacturers has been steadily increasing over the past three years, after a period of exemption
Thinking of upgrading to the latest model of your preferred phone brand? Take a pause. Mobile phone prices are about to go up.
In the national budget of Tk7,89,999 crore for FY2025-26 unveiled today (2 June), the interim government has increased the value-added tax (VAT) on mobile phones from 5% and 7.5% to 7.5% and 10%, respectively.
Industry investors fear that the new VAT hike, if implemented amid ongoing economic challenges such as currency devaluation and high inflation, could dampen sales further, and manufacturers will, ultimately, pass this on to consumers.
Keep updated, follow The Business Standard's Google news channel
The VAT burden on mobile handset manufacturers has been steadily increasing over the past three years, after a period of exemption.
Recently, the National Board of Revenue (NBR) had imposed a 5% VAT on manufacturers producing at least two local components and a 7.5% VAT on those importing entire components for mobile production. Now, VAT will rise by another 2.5% for both categories.
"Currently, the size of the grey market for mobile phones is nearly 50%. If VAT is increased without addressing the grey market, the price gap will widen, pushing consumers towards illegal imports," Rezwanul Hoque, CEO of Transsion Bangladesh (a subsidiary of Transsion Holdings, which owns brands like TECNO, itel, and Infinix), told The Business Standard earlier.
"Consumers will be forced to pay higher prices for locally manufactured handsets, while the grey market will flourish due to the price disparity," he added.
He further projected that smartphone sales, which reached approximately 7.9 million units in 2024, could drop by 20% this year due to the VAT hike and other factors.
