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Dhaka Tribune

Proposed Vat on e-commerce to slow its growth

Update : 14 Jun 2015, 07:04 PM

Imposition of 4% value added tax on e-commerce for the fiscal year 2015-16 may hinder the growth of the emerging online business, said the sector insiders.

According to them, if it happens, the process of building a digital Bangladesh will also slow down.

They alleged that finance minister didn’t have any discussion with them before taking such a move in the budget which was announced on June 4.

“There was no discussion with us before taking the illogical decision of imposing 4% Vat on e-commerce. It may have a negative impact on the process of digitalising the country as per the government goal,” Md Abdul Wahed Tomal, founder and general secretary of e-Commerce Association of Bangladesh (e-CAB), told the Dhaka Tribune.

In the proposed budget for the upcoming fiscal year, the government has proposed 4% Vat on online trading of goods and services.

“As the delivery charge is included, the prices of goods in online trading are a bit higher than in the traditional retail shops. If 4% Vat is added, the prices will be even greater. This will discourage people from buying online, and prevent the growth of the nascent sector,” said e-CAB general secretary.

He said they were not against the Vat, but sought time to grow up before making contribution to the government exchequer.

He also called on the government to formulate a policy making it clear that how and who will pay the Vat.

“It (4% Vat) is a suicidal decision,” said Shameem Ahsan, president of Bangladesh Association of Software and Information Services.

He said the e-commerce is still an immature sector in Bangladesh, and the proposed Vat would make it difficult for the sector to sustain.

Sadequa Hassan Sejuti, managing director of Future Solution for Business (FSB) Limited, also echoed them while commenting on the proposed tax.

“The country’s e-commerce sector is at an early stage and the proposed Vat will discourage the consumers to purchase online. So, this will be detrimental for the emerging sector,” she said.

According to Sadequa, as the e-commerce entrepreneurs are now struggling to reach the break-even stage, they need policy support from the government to grow up.

She said the decision should be overturned to encourage farmers to get involved in the online trading and secure fair prices for their produces.

According to the sector insiders, imposing Vat at this stage of a growing sector will encourage the entrepreneurs to dodge tax, which will create an unhealthy practice in the market. 

There are over 500 e-commerce and online shopping companies in Bangladesh with an annual trade volume of about Tk200 crore. The number of consumers are about 10 lakh mostly based in the capital and some in the district headquarters level. 

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