A boost for ICT
The government is going to bolster the country's expanding ICT sector with tax exemptions in six more services and VAT waiver on hardware manufacturing as it looks to prepare the nation for the fourth industrial revolution.
With the new tax breaks in cloud computing, system integration, e-learning platform, e-book publication, mobile application development and IT freelancing until 2024, now 28 services in total would enjoy the benefits.
Finance Minister AHM Mustafa Kamal also offered tax exemption, subject to certain conditions, for 10 years on manufacturing some selective hardware.
"This will give impetus to the digital transformation process of Bangladesh, make modern digital services easily available to the citizens at low costs, and will also leave a positive impact on materialising the dream of Digital Bangladesh," said Kamal.
"This tax holiday will help bring in more investment, create entrepreneurs and generate employment. We welcome the step of the government," said Syed Almas Kabir, president of the Bangladesh Association of Software and Information Services (BASIS).
The apex trade body for software and IT-enabled service industry proposes new services for inclusion in the list for tax exempted services every year before the budget.
"However, we wanted tax exemption for all forms of digital payments and tech-enabled services until 2030 as Covid-19 has brought some setbacks," added Kabir.
"Now we need more investment to attain our targets. If local and foreign investors see long-term tax holiday, they become more interested in making investments," he said.
The industry also wanted a Tk 500 crore fund from the budget to implement big ICT projects such as those for e-government procurement (e-GP), digital national identification (NID) card and smart driving licence in underdeveloped and developing countries.
"If the government inks agreements with these foreign countries and provides them subsidies on condition that the services will be developed by Bangladeshi companies, then we will get our money back as well as new experience and exposure," said Kabir.
The industry also demanded a 4.5 per cent VAT exemption at source.
"Bills of the services usually come a few months later and in many cases, the clients don't pay the full amounts. So it is really problematic for us. VAT must be paid, but not at source," he added.
The IT industry first got a shot in the arm in 2008, when the government provided income tax exemptions on tech-enabled services until 2024.
The government also added e-learning and e-books within the scope of information technology-enabled services (ITES). The "Make in Bangladesh" theme for IT hardware was also encouraged.
The tax exemption for industries producing certain hardware also aims to increase self-sufficiency by reducing dependency on imports.
The items include computers (including laptops, all-in-one (AiO) and desktops) and most parts and accessories; notebook, notepad, tabs and e-writing pads; closed-circuit televisions (CCTV), power banks, projectors and digital watches.
"This will definitely decrease the production cost for local manufacturers," said Mustafa Jabbar, minister for posts, telecommunications and information technology.
"Like mobile manufacturing advancement, we want to be self-dependent for computer, laptop and other digital hardware devices," he said.
IT hardware manufacturers welcomed the government steps.
"If you want to give a boost to the local industry, there should be a gap in terms of VAT and tax between the locally manufactured ones and imported ones," said Liakat Ali, deputy managing director at Walton Digi-Tech Industries, one of the country's top IT hardware manufacturers.
"And with such tax and VAT exemptions, local manufacturers will get encouragement. It's a good step and we welcome it," he added.