Concerns over instability in telecommunications sector

The cost of mobile phone services and internet usage has been increased once again. Experts fear that the imposition of new taxes will create instability in the telecommunications sector. Marginalized individuals and small businesses reliant on mobile and internet services are expected to bear the brunt of this decision.

Industry insiders have expressed concerns that rising inflation has already increased the cost of living, and this additional tax hike could have a detrimental effect on the sector. According to the Value Added Tax and Supplementary Duty (Amendment) Ordinance—2025, the VAT rate has been increased to 23% for telephone services and 10% for internet services under articles 3(g), service codes S012.10 and S012.14. While there has been a long-standing demand to reduce mobile call rates and internet package prices, the government has instead imposed additional supplementary taxes on mobile users.

On January 9, two new ordinances were issued: the VAT and Supplementary Duty (Amendment) Ordinance-2025 and the Excise and Salt (Amendment) Ordinance-2025. These changes were immediately implemented following directives from the VAT division of the National Board of Revenue (NBR).

According to NBR sources, the decision to increase VAT on certain goods and services was taken to meet the conditions set by the International Monetary Fund (IMF). On January 1, the interim government’s advisory council approved the NBR’s proposal to increase VAT and supplementary duty rates.

During the 2024-25 fiscal year budget, the previous government had already increased the supplementary duty on mobile phone services from 15% to 20%. The interim government has now raised it further to 23%.

Previously, on a recharge of 100 BDT, a total tax of 54.6 BDT, including VAT, supplementary duty, and surcharges, was deducted. With the 3% increase in supplementary duty, consumers will now pay 56.3 BDT in taxes for the same amount. This means they can only utilize 43.7 BDT from a 100 BDT recharge.

For the first time, supplementary duty has also been imposed on internet services provided by ISPs. A 10% supplementary duty will now apply. Local businesses will also face increased VAT rates, rising from 5% to 7.5%. For example, on a bill of 500 BDT, the total tax burden will now be 77.5 BDT, compared to 25 BDT previously. A 1,000 BDT internet package will now cost 1,155 BDT. Since supplementary duty is now being imposed, ISPs are likely to collect both VAT and supplementary duty from consumers, thereby increasing costs for end-users.

Lt. Col. Md. Zulfiker (Retd.), Secretary-General of AMTOB, said "The additional tax on mobile services will increase the cost of mobile and internet usage, posing challenges for marginalized and low-income individuals, especially students. This could lead to a reduction in operator revenues, potentially affecting the government’s revenue collection from this sector.”

He urged the government to consider mobile services as an essential sector and revise the tax structure to support service quality improvement, avoiding an immediate tax increase.

Aminul Hakim, Chairperson of Bangladesh Internet Governance Forum (BIGF) and President of the International Internet Gateway Association of Bangladesh (IIGAB), said:
"End-users receive internet services through ISPs at the grassroots level. Each segment of the internet ecosystem already contributes multiple taxes and revenue shares, yet additional supplementary duty has been imposed on ISPs. This effectively means the government is taxing the same product multiple times. Increasing costs for consumers will exacerbate the digital divide and hinder the growth of the broadband sector, especially in rural areas.”

He added that "Broadband connectivity is directly linked to GDP growth, as per World Bank data. Increasing the cost of internet services will discourage usage and hinder employment opportunities. The government’s move to tax internet services as if they are luxury goods sends the wrong message, given the critical role of the internet in education and employment, especially during the COVID-19 pandemic. Such measures will widen the digital inequality between urban and rural areas.”

Imdadul Haque, President of the Internet Service Providers Association of Bangladesh (ISPAB), emphasized "This move will directly impact consumers by increasing internet costs. Entrepreneurs will also face higher operational expenses, which could lead to reduced service quality and a decline in customer numbers, ultimately affecting the entire ecosystem.”

Renowned ICT expert Suman Ahmed Sabir said, "Over the past year, customer numbers have decreased due to inflation, and a further tax increase will exacerbate the issue. Businesses rely on year-on-year customer growth to remain profitable, and higher taxes could disrupt this. While the government may have its reasons for this decision, the added burden on consumers and businesses cannot be ignored. Reduced internet usage will hinder education, employment, and overall economic progress.”

He concluded by stressing the importance of considering the long-term impact of such measures on the digital economy and urging the government to prioritize fair taxation policies.