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Online shopping to be costlier for proposed 7.5% VAT

  • Published at 11:43 pm June 14th, 2019
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E-CAB members to hold emergency meeting on Saturday

Online shopping is set to get costlier as the government has proposed imposing 7.5% value added tax on the sector in the proposed budget for the 2019-20 fiscal year.

The third schedule of the Finance Bill 2019 said social media and virtual businesses will have to pay 7.5% VAT, as read out by Finance Minister AHM Mustafa Kamal in the parliament on Thursday.

National Board of Revenue (NBR) First Secretary (VAT policy) Hasan Mohamad Tarek Rekabbar confirmed the matter to Dhaka Tribune.

He, however, did not explain why the proposed tax was being imposed.

Last year, former finance minister AMA Muhith had proposed 5% VAT on the sector, but withdrew the proposal later, claiming it was a printing mistake.

Industry insiders said though it was announced last year, online businesses were still on the list of VAT exempted sectors.

“But this year, e-commerce businesses have been excluded from the exemption list, and it was mentioned at a point that social media and virtual media would have to pay 7.5% VAT,” said Md Abdul Wahed Tamal, general secretary of E-commerce Association of Bangladesh (e-CAB).

“NBR was considering the e-commerce sector separately, but this year, it merged the sector with social media, which is not acceptable,” Tamal said, adding that the country’s e-commerce start-ups and global social media networks like Facebook and Youtube cannot be considered on the same scale.

Tamal, however, expressed fear that the new VAT imposition may badly affect the e-commerce industry, which is growing rapidly and generating a substantial amount of employment opportunities.

The prices of online products will increase due to the new provision, which may detract consumers away from shopping online, he added.

Emergency meeting

The e-commerce stakeholders plan to meet on Saturday to discuss the proposed VAT, at e-CAB's office in Dhaka on Saturday, informed Tamal.

A press conference will be held immediately after the meeting, he added.

Currently, there are about 1,000 e-commerce outlets in the country, with annual turnovers of more than Tk1,000 crore. But the numbers are growing every day, the association leader said. 

Besides, some 50,000 entrepreneurs are trying to expand their businesses through the social media giant, Facebook.

About 30,000 consumers are ordering different items online every day and the yearly growth of the sector is about 25% on average, informed the association.

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