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Monday, June 25, 2018

Tax on mobile assembling hits entrepreneurs

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Tax on newly-formed mobile assembling sector will negatively impact the business and investment of the new entrepreneurs as proposed tax would increase costs more than imported handset.

According to the proposed budget, every assembler must add 30 percent value and have the capacity to manufacture five components of a mobile phone: printed circuit board, charger, battery, housing and casing.

Assemblers said, no globally renowned companies such as Apple, Samsung, Huawei and Transsion manufacture devices on their own. None of them in the world manufacture batteries or chargers themselves.

China, the world's largest assembling country in the world, has the value addition charge about 25 percent only, where Bangladesh trying to impose more than 30 percent VAT.

India's local companies, however, started mobile assembling eight years back with around 7 percent value to their produce. So entrepreneur who invested their money claimed that it is totally illogical for the NBR to order for adding 30 percent value to the devices to get tax benefits as a manufacture.

Entrepreneurs said,  it took about 20 years to bring the garment industry to a shape and even they are not manufacturing all the components, but how come government think to impose such cost to a new-born industry of mobile manufacturing which started less than a year ago.

Rezwanul Haque, CEO of Transsion Bangladesh Ltd, a company that markets Itel and Tecno branded mobile phones has said, Most of the entrepreneur who started the process of making and installing mobile factories are mostly assembler. They will be face difficult challenges.

He said, if the additional proposed VAT is passed, the cost of importing the handset will be more than the locally assembled where the import is around 33 percent locally assembles will have to pay around 35 percent VAT/Tax.

Already Samsung, WE said they might have to close their factory. Ruhul Alam Al-Mahbub Manik, chairman of Fair Group, established a plant in Narsingdi with the brand Samsung said, "We will have no other way then to shutdown our plants if the new tax structure imposed."

Market analysts, economists think that it is a timely decision for exemption of VAT and surcharges for the mobile phone manufacturer to encourage assembling by discouraging the import.

Mohammad Shahabuddin (ACS), Secretary-General of Computer and Mobile Manufacturers and Exporters Association of Bangladesh said, "Bangladesh manufactures standard mobile phones, so the government needs to provide supports to the manufacturers."

He said, "There's a need to make a difference between the assembled and imported phones. If government increases duty on imports, the domestic investors will get benefit. The import will reduce. The foreign currency will be saved."

Former adviser to caretaker government and economist Dr Akbar Ali Khan said, "Giving priority to the technology sector is now a demand of time. The government should take positive decision in the proposed budget. The budget should encourage internal production. So, mobile phone accessories duty should be exempted."

He also said, "Industrial development is a positive thing for the country's economy. It helps decrease unemployment and boost steady growth. Mobile phone manufacturing will positively impact our economy."

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