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The country's burgeoning ICT sector seems to have been ignored in the new budget with no specific allocation although ICT has been declared a 'thrust' sector by the government.
The new budget lacks vision - it does not show any specific allocation for ICT spending in the public sector, industry insiders said hinting that the budget has not mentioned anything about the development of human resource, which is considered to be vital for developing a knowledge-based society in the country.
Moreover, they observed, prices of some computer accessories including inkjet printer and toner cartridge for laser printer will increase by 12 to 15 percent because of enhanced import duty and other charges.
The country's fast-growing computer market is also in yawning trouble as frustration among the businessmen is mounting due to the government's inertia in withdrawing Value Added Tax from imported computers and accessories items.
"The controversial imposition of VAT on retail level is not mentioned in the budget which has already created anarchy among the importers", Abdullah H Kafi, former president of the Bangladesh Computer Samity, said.
According to the aggrieved businessmen, the new budget has not indicated anything about the withdrawal of retail-level VAT from the imported computers and computer accessories. Rather it has doubled the trouble of some ICT products' importers, imposing new tax burdens on some imported computer accessories.
"We expected a clear announcement in the budget that the government would withdraw retail VAT from all levels of computer trade," SM Iqbal, president of the BCS, the apex body of the country's computer businessmen, said.
"But the government is unlikely to withdraw the entire amount of tax, which it is asking from the last few months for a three-year total at a time. Still, we are negotiating the issue with the National Board of Revenue officials so that it can be lowered to a sizeable amount", he said.
After all, such initiatives will only cause harm to the growth of this promising sector, which is still in its "nascent" stage, an aggrieved Iqbal said adding that any pressure of tax would have an adverse impact not only on its growth, it will also add to the plight of the ICT products' customers.
The BCS, in its budget reaction, has said that the government's policy of expanding the information and communication technology has not been reflected in the budget.
It also said that in the budget, there was no mention of VAT holiday for the imported computer items, which was being negotiated between the BCS and the NBR for the last few months.
Though the government had exempted imported computers and its accessories from VAT through SRO no 147-ACT/2001/312-VAT in June 2001, the NBR has continued to ask for it, saying that computer accessories are not incorporated in the exemption list as per the VAT Act 1991.
At present, the NBR is charging 15 per cent VAT on imported computers and accessories considering a fictitious 10 per cent value addition charge.
BCS Secretary General Ali Ashfaq said in the VAT Act of 1991, the government had exempted all sorts of VAT from computer items at both import and manufacturing levels. As nothing was mentioned clearly about the VAT in retail level, the computer traders did not charge VAT from the retail-level customers and the VAT officials also overlooked the issue for the last few years.
"But now they are forcing us to pay a handsome total charging VAT for the last three years at a time. How can we pay the amount that we did not collect?" he asked.
Echoing the same sentiment, SM Iqbal said that it was some of the NBR officials who had confused us at that time misinterpreting the VAT issue.
The VAT authorities are sending demand notice to all importers since November 2003 asking them to pay the VAT on import value for the computer items imported since 2001.
Meanwhile, the country's computer market is witnessing a sharp fall in the wake of imposing new VAT on some ICT products in the budget.
Prices of laser printer's toner and ink of inkjet printer have already marked a rise by Tk 200-600 in the city's computer markets.
It is seen that the prices of Lexmark and HP brand cartridge have also risen by Tk 200 and Tk 400 respectively, while the rate of toner has risen by Tk 400 - 500 per piece. Price of Canon brand laser printer toner has gone up to Tk 3400 from the existing Tk 2800 during the last four days, said a vendor.
"With the increase of prices, we will stand to lose customers and it will widen smuggling opportunity for a number of computer products," said Mostafa Shamsul Islam, managing director of Flora Limited, distributor of Canon and Epson printers in the country.
In the new budget, an import duty up to 7.5 per cent is imposed on the aforesaid computer accessories.
Three per cent Advance Income Tax on ink for inkjet printer and 4 per cent Infrastructure Development Surcharge apart from 3 percent AIT on toner for laser printer has also been proposed.
"Imposition of import duties and other charges on these items will increase the ultimate price of the items from 12 to 20 per cent", Kafi said.
"The problem is functional, rather than a policy issue. There is no tax on ribbon, how can there be tax on toner and cartridge? Are these not the computer items?" Iqbal ridiculed.
"It seems there is a serious lack of coordination between the policy making and the implementation levels", a frustrated Iqbal said.
Change of duty structure from four-tier to three-tier will also move the prices of some ICT products up, some of the businessmen feared. Prices of the ICT products may further increase due to the recent downward adjustment of taka (at over 5%) with major currencies.
However, it is known that the government is currently charging one per cent pre-shipment inspection service charge and 4 per cent development surcharge on all computer equipments excluding UPS, modems, blank CDs, floppy diskette and capture card. Besides, 7.5 per cent duty is being charged on UPS, modems, blank CDs and floppy diskette; and 3 per cent advance income tax on UPS, modems and UTP RJ-45 cable.
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