VAT on Mobile Phones that made locally may rise in upcoming budget
The government plans to raise VAT on mobile phones in the 2025-2026 budget. The proposed VAT increase could affect prices and the mobile phone market in Bangladesh.
The government is considering raising the value-added tax or VAT on locally produced mobile phones in the upcoming budget set to be announced on June 2. According to sources from the National Board of Revenue (NBR) the current VAT rate on mobile phones produced in Bangladesh ranges from 5 to 7.5 percent depending on the manufacturing process. The proposal suggests increasing these rates by 2.5 percent.
NBR officials explained that if a company manufactures at least two components of a mobile phone locally and imports the rest for assembly, they currently pay 5 percent VAT. This rate could rise to 7.5 percent. For companies that import all the parts and only assemble the phones in the country, the current VAT rate is 7.5 percent, which may increase to 10 percent.
Despite the proposed increase, NBR representatives believe that technological advancements are making devices more affordable, so the price impact might not be significant.
The demand for smartphones in Bangladesh has grown rapidly in recent years, with around 17 companies now producing and assembling smartphones locally. However, the Mobile Phone Industry Owners Association of Bangladesh (MIOB) has raised concerns about the VAT hike.
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Rezwanul Haque the vice president of MIOB told that “Increasing VAT will not achieve its intended goals unless illegal imports of smartphones are stopped. Over 50 percent of smartphones in the market are smuggled. Raising VAT on local phones will only make smuggled phones more attractive and enlarge the illegal market.” He also added that the VAT increase could raise the price of each phone by around 500 taka.
According to data from the Bangladesh Bureau of Statistics about 70 percent of households in Bangladesh use smartphones. A report released by the Global System for Mobile Communications Association (GSMA) in October 2024 shows that 41 percent of people in urban areas and 26 percent in rural areas use smartphones.
With smartphone use rapidly growing, any increase in VAT could affect the affordability of mobile phones for many users. The government’s final decision on this proposal will be revealed in the upcoming national budget.
