BM Desk : The interim government has introduced a technology-oriented fiscal plan in the proposed national budget for FY 2025-26, which includes tax relief for telecom operators and internet service providers, alongside increased incentives for local startups.
Simultaneously, the budget enforces stricter value-added tax (VAT) regulations on mobile manufacturing, e-commerce commissions, and over-the-top (OTT) digital streaming services.
A key highlight is the suggested decrease in turnover tax for mobile phone operators, reducing it from 2.0 percent to 1.5 percent, which addresses a long-standing request from the industry in light of rising operational expenses and declining average revenue per user (ARPU).
Additionally, the government has modified the VAT framework for mobile handset production. While it has extended VAT exemptions on the manufacturing and assembly of mobile phones until June 30, 2027, these exemptions have been slightly reduced.
Consequently, VAT rates on mobile handsets have been adjusted upward—from 5.0 percent and 7.5 percent to 7.5 percent and 10 percent, respectively.
Industry experts have voiced concerns that this adjustment may lead to increased handset prices. Nevertheless, Xiaomi Bangladesh Country Manager Ziauddin Chowdhury minimized the potential impact.
“This will not significantly affect consumers or businesses. Manufacturers might experience a minor reduction in margins, but it is not considerable,” he stated, adding that most local manufacturers contribute approximately 30 percent value during production.
On the digital access side, the budget suggests lowering the withholding tax on Internet Service Providers (ISPs) from 10 percent to 5.0 percent. This initiative is anticipated to decrease internet costs and enhance service quality across the country.
In response to the proposal, Mohammad Aminul Hakim, the President of the Internet Service Providers Association of Bangladesh (ISPAB), stated that the initiative would mainly benefit larger ISPs.
“Smaller providers might not experience a significant advantage from the tax reduction,” he remarked.
To promote innovation and assist early-stage businesses, the government has suggested a dedicated Tk 1.0 billion startup fund for the fiscal year 2025-26.
“Given the potential of the IT sector and the necessity to support new entrepreneurs, we have chosen to allocate this amount as part of our digital transformation initiative,” Finance Adviser Dr. Salehuddin Ahmed mentioned during his televised budget address.
In a positive development for the ICT hardware sector, the VAT exemption on computer monitors has been broadened to cover screens up to 30 inches, an increase from the previous 22-inch limit.
Industry analysts anticipate that this will enhance the accessibility of larger displays, especially for educational and professional purposes.
At the same time, the government is tightening tax compliance in the expanding digital commerce sector. The VAT on commissions earned by online marketplaces has been significantly increased from 5.0 percent to 15 percent.
This adjustment targets e-commerce platforms that operate on a commission-based model, indicating a move towards higher revenue collection from the industry.
Furthermore, a 10 percent supplementary duty has been proposed for OTT (Over-The-Top) platforms that provide content streaming over the internet. This action is viewed as part of a larger strategy to regulate digital media and incorporate it into the formal tax framework.
