ISPAB threatens to suspend internet services over VAT

The Internet Service Providers Association of Bangladesh has threatened to suspend its services across the country if the double-layer value added tax imposed on the sector is not revised.

The ISPAB issued the threat from a virtual media briefing on Saturday amid the coronavirus pandemic that made people more dependent on internet services.

“We have decided to suspend internet services across the country on a limited scale if the VAT-related complications are not solved,” ISPAB President MA Hakim said.

“We will suspend the services for one or two hours at a certain time every week. The shutdown will be effective soon.”

The internet has played a key role in sustaining various sectors, including education, health, business and commerce, since the coronavirus epidemic emerged in Bangladesh in March.

ISPAB authorities said they are providing non-stop internet services despite a 40-50 percent drop in fee collections and health risks faced by its staffers amid the epidemic.

A total of eight million customers are using internet connections provided by the ISPAB, while its broadband services have around 35 million subscribers, Hakim said.

The VAT on internet services is 5 percent while the rate is 15 percent on internet-related value chain services provided by International Terrestrial Cable (ITC), International Internet Gateway (IIG) and Nationwide Telecommunication Transmission Network (NTTN). The differences in VAT rates could have a detrimental effect by driving up the cost of internet services by 30-40 percent in the country, according to Hakim.

"Internet service providers collect 5 percent VAT from customers, while ITC, IIG and NTTN are having to pay the other 15 percent VAT. ISPs will therefore have to account for 35 percent VAT in total.”

The problem emerged after the government lowered the VAT on internet services provided by ISPs and mobile telecom operators to 5 percent in the budget for FY 2018-19 while imposing a 15 percent VAT on other value chain services.

The National Board of Revenue later revised down the VAT rates to 5 percent for internet and value chain services.

But the crisis resurfaced after the government reinstated the different VAT rates for the two services in the budget for fiscal 2019-20.

Hakim has termed the decision to impose 15 percent VAT on value chain services as ‘discriminatory’ and said it is a violation of VAT law.

He urged the government to impose 5 percent or zero percent VAT on all internet sectors to resolve the matter.