ICT trade bodies yesterday termed the proposed budget inconsistent with the government's Smart Bangladesh vision, demanding withdrawal of VAT on software development and import duty on crucial software.

They said the budget for fiscal year 2023-24 did not reflect the proposals of the information and communications technology (ICT) sector.

They expressed their views at a press conference over the budget at the Bangladesh Association of Software and Information Services (BASIS) in Dhaka.

"Import duty on operating systems, database security software and development tools has been increased from 5 per cent to 25 per cent," said BASIS President Russell T Ahmed.

"…and a 5 per cent VAT on software has been proposed which is incompatible with the Smart Bangladesh goal."

"Those types of (crucial) software are developed by some global players and these are the raw materials for our local software development."

According to Ahmed, the changes will increase the cost of software development, hindering the growth of the sector, which is the nucleus of ICT development of a country.

He urged the prime minister to direct the revenue authority to withdraw the changes.

"Smart Bangladesh means that every sector will be smart. The education, health, agriculture, energy and all other sectors will be smart."

But increasing the import duty and imposing the VAT will increase the price of software which is inconsistent with the objective of implementing Smart Bangladesh, he added.

The BASIS had made specific and logical proposals such as extending corporate tax exemption for this sector till 2030 and withdrawing VAT on software and information technology enabled services (ITES).

The BASIS had also urged increasing cash incentives on software and IT services exports from 10 per cent to 20 per cent.

"I had proposed to give special incentives to local purchase of local software to develop the domestic software industry. But none of them were considered," Ahmed said.

Abrupt policy changes are hampering growth of the ICT sector and dampening the investors morale, said Wahid Sharif, president of the Bangladesh Association of Contact Center & Outsourcing.

"As result of the 25 per cent import duty on necessary software, the cost of services in this industry will increase and will have a negative impact on the international market. Bangladesh's ICT sector will lose competitiveness in the international market."

Thanks to the existing corporate tax exemption, employment in this industry has grown from just 300 in 2009 to more than 70,000 people today, he said.

In the budget proposal, the request to extend the period of corporate tax exemption from 2024 to at least 2030 was not taken into consideration, Sharif added.

"As a result, the price of business process outsourcing services will increase in the future, customer attraction will decrease, new investment will be hindered, and the overall progress of the BPO industry will be hampered."

Services of internet service providers have not been listed under the ITES in the proposed budget in spite of the prime minster agreeing to it previously, said Md Emdadul Hoque, president of the Internet Service Providers Association of Bangladesh.

"We are very disappointed with the NBR decision."

"We strongly request the finance minister and the NBR (National Board of Revenue) chairman to take the ISP sector forward through the inclusion of all the services of the ISPs in the ITES to ensure the best use of internet and remove obstacles."

Mohammad Shahabuddin, vice president of the e-Commerce Association of Bangladesh, thanked the NBR for recognising the e-commerce marketplace by giving it a specific definition.

He called for removing the 5 per cent VAT on software development for the advancement of the e-commerce sector.