Abuse of power: Yunus’s Grameen Distribution Limited did not follow the rules despite being VAT-exempt

BD Digest Report

The government has been providing VAT exemption facilities in various sectors in the budget to encourage manufacturing-oriented companies in the country. In continuation of this, the National Board of Revenue (NBR) has granted VAT exemption to various companies in the country to encourage the production of mobile phonesets (smart and feature phones).

One such company is the Grameen Distribution Company of Dr. Yunus, the former chief advisor to the interim government. Although the company was granted VAT exemption on the condition that it produce 50 percent of its batteries and chargers, they did not comply with that condition.

On the contrary, these products have continued to be imported. The report of the investigation committee formed by the NBR and the Bangladesh University of Engineering and Technology (BUET) has found evidence of Grameen Distribution violating the conditions to take VAT benefits. And despite receiving evidence, the NBR is silent about the company. This information has been revealed by relevant sources.

Sources said that Grameen Distribution Limited (GTL) started its journey as a mobile phone manufacturing company in the country in 2009 and became known as one of the leading mobile phone manufacturing companies in the country. Currently, Grameen Distribution is producing mobile phones under three brands – GDL, GTE, and Benco. At the same time, they are marketing two other brands of mobile handsets – Lava and Infinix. The company has been taking advantage of VAT exemption since 2019.

At the same time, 50 percent of mobile phone chargers and batteries are receiving VAT exemption benefits in 2023, subject to production.

The NBR granted VAT exemption to Grameen Distribution through SRO (a procedure for making changes to tax policy by issuing a notification without amending the law). Until 2023, smart phone manufacturers were required to have the capacity to produce printed circuit board (PCB) chargers and batteries to receive VAT benefits. Even during this period, Grameen Distribution took advantage of VAT exemption without fully complying with the conditions. The NBR stipulated that the capacity to produce smart phone PCBs, chargers and batteries should be increased to 50 percent to receive VAT exemption benefits after 2023.

Although they took advantage of the rural distribution VAT exemption by complying with this condition, they did not comply with it.

Apart from this, one of the conditions of this notification (SRO) was that there should be a battery and charger production unit in front of the institution and it should produce. But instead of producing, Grameen Distribution has continued to import batteries and chargers. The investigation committee formed by NBR and BUET did not find any evidence of battery and charger production during the on-site inspection.

Despite repeated calls to NBR Chairman Abdur Rahman Khan to inquire about this matter, he did not pick up. Later, there was no response even after sending a text message to his mobile phone mentioning the investigation report.

Sources further said that after the implementation of the new VAT law, the VAT rate for mobile phone set manufacturing companies was fixed at 5 percent. This VAT rate has been increased to 10 percent in phases. However, VAT is available at two levels of 7.5 and 10 percent. Grameen Distribution Limited has been getting benefits subject to compliance, as per the table in the NBR’s VAT exemption notification (Table-2).

According to Table-2, the VAT rate will be 7.5 percent. Due to VAT exemption, the company will not have to pay this 7.5 percent. In this case, the condition for VAT exemption is that 50 percent of the chargers and batteries of the manufactured phones must be produced by itself. And the remaining 50 percent of the batteries and chargers can be imported. In this case, the investigation report has revealed that Grameen Distribution has failed to comply with this condition of battery and charger production.

Several officials involved in the investigation said that Grameen Distribution had partially complied with the conditions of the initial VAT exemption notification. Later, after 2023, when the VAT exemption notification imposed a new condition of 50 percent production of chargers and batteries, the company no longer complied with it.

Stating that there were various ambiguities in the NBR’s VAT exemption, the officials involved in the investigation said that those who visited the institutions before granting VAT exemption and those who issued notifications regarding these benefits needed to review the matter more thoroughly. It has now become embarrassing for the NBR to issue such notifications without reviewing them.

They say that there are some complications in the VAT return as well. Now the NBR is working on the investigation report. In this case, in the light of the investigation committee’s report, the process is underway to send a letter to the concerned commissionerate to find out whether the compliance of these institutions was correct or not.

Kalbela tried to talk about the matter by calling Grameen Distribution Managing Director (MD) Zahurul Haque Biplob several times, but he did not pick up. Later, in a written message on this reporter’s WhatsApp, he claimed that they had filed an application with the VAT Policy Department of the NBR on behalf of the Mobile Phone Industry Owners Association of Bangladesh regarding the investigation report. In the application, they said that the members of the investigation committee had submitted the accounts of battery and charger production monthly instead of annually. This has created complications.

The MD of Grameen Distribution also said that the report submitted by the investigation committee stating that the conditions of the notification were not complied with is inconsistent. Because the approval of VAT exemption is extended after examination every year. In addition, the negative report against the VAT exempted institutions in Table-2 was given by presenting some assumptions without considering the conditions of the notification, claimed Grameen Distribution MD Zahurul Haque Biplob.