The growing online shopping is to be costly as budget for fiscal 2019-20 proposed 7.5 percent value added tax for online shopping and purchasing goods from online shops. Finance minister AHM Mustafa Kamal on Thursday proposed the measures with an amendment to the new VAT and Supplementary Duty Act-2012 placed before parliament as part of his budget proposals.
Earlier, online shopping received a 5 per cent VAT imposition in the previous budget of 2018-19 which was later dropped citing reasons that it was a printing mistake. Industry insiders said last year VAT was exempted through a clearer definition, but this time though, it is included through definition in the documents. e-commerce businesses have been included under ‘Social Media and Virtual Businesses’ category which defines, any kind of sales transactions made by usage of electronic media, through the internet, by means of social media or mobile applications, belongs to this category.
Industry leaders are strongly opposing against the 7.5 percent VAT saying the VAT is too much for the emerging e-commerce sector and claiming the move will go against the digitisation of the country. Multiple industry leaders are fearing that new VAT imposition may badly affect the e-commerce industry, which is growing rapidly and generating a substantial amount of employment opportunities. The prices of online products will increase due to the new provision, which may detract consumers away from shopping online. They are opposing the move with a question over Govt’s recent decision to train up about 5,000 e-commerce entrepreneurs which has been taken earlier this year.
Currently, there are about 1,000 e-commerce shops in the country and annual turnover is about Tk 2,000 crore. Besides, some 50,000 entrepreneurs are trying to expand their businesses through the social media giant, Facebook. About 30,000 consumers are ordering different items everyday and the yearly growth of the sector is about 25% on an average, according to the insiders.