VAT imposition on e-commerce

Business leaders have expressed concern on the proposed imposition of 4 percent value added tax (VAT) on e-commerce sales. At a recently held seminar, representatives of Bangladesh Association of Software and Information Services (BASIS) argued that such imposition will be counterproductive for local vendors who face competition from foreign players owning internet sites registered abroad. As VAT will not be applicable on their sales, Bangladeshi electronic commerce (e-commerce) sites will be at a natural disadvantage. With about Tk 100 crore in annual sales, this is a growing industry that falls in line with the vision of "Digital Bangladesh", a cornerstone of government policy that aims to reach digital services to the masses.

Industry proponents argue that introduction of VAT would add a paltry Tk 4-5 crore to the national exchequer, but drive out the bulk of the local competition which will be at odds with foreign competition. There has to be a level playing field for domestic and internationally-owned businesses for e-commerce to reach its full potential. The other problem is that for any vendor to remain profitable, the imposition of VAT will take payments offline whereby vendors can dodge the whole issue of paying VAT to NBR i.e. consumers may have to "pay on delivery". 

E-commerce holds the potential to employ thousands of educated youth in the country and should be recognised as a potential growth sector for the economy. It qualifies for policy support. Balancing the revenue budget by imposing VAT on a growing industry is hardly the way forward.