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New VAT, Source Tax structures remain concern for RMG sector
Jun '11
As a residue of the recent budgetary announcements for the year 2011-12 by Bangladeshi Finance Minister, Ready Made Garment (RMG) sector figures crisis on the face of several revised taxes structure in the budget this time.

RMG associations and players regard the post budget tax structure, to be imposed on the industry, not affordable and needs revision by the Government.

Amongst several important taxes as announced in the budget, the 0.4% Source Tax levied on apparel sector and 0.5% on others, has been increased to 1.5%.

Associations and RMG exporters believe this to be an increased burden when there already exist big issues of electricity and gas shortages to be confronted.

Reasoning for the worry, as expressed to Fibre2fashion, Mr Nasir Uddin Chowdhury, MD, Eastern Apparels Ltd, speaks-“At the moment, this increase is not bearable for, though we have achieved a growth of 42%, it is not actually growth being of inflated kind due to raised material cost. In turn, the Freight on Board (FOB) price is raised and hence total value is increased by 50%. Since our FOB has increased, everywhere our expenditure goes up. On the port we are paying charges on the total value; in the banks we are paying charges on the total value; on the insurance we are paying on the total value; and so on.”

Mr Chowdhary also points out that Small and Medium Enterprises (SMEs) that constitute 60% of country's total industrial share and have around 400 machines facilitations, are under tremendous pressure allied to electricity and gas dearth to run the mills. In addition, if VAT 9% is levied, it will bash industry to closure.

Mr Abdus Salam Murshedy, President, Exporters Association of Bangladesh, also attributes the increase in the Source Tax to be a detrimental step in the healthy growth of the industry. Besides this, in his view, 9% VAT for apparel, though being rudimentary in principle, is adding to the woes of the sector in current context when internationally, market is weak with reduced purchasing power, not completely out of recession as well.

Apart from that, the president observes that the steep rise in cotton prices followed by sudden fall unprecedented, has left the sector shaken and in turmoil, especially for his country that is not self reliant in its cotton requirements. Even the interest rates in the banks are on the higher side, he notices.

Urging to the policy makers to reconsider revision in these tax structures, the representative aspires – “We are hopeful that the Government will realize the difficulties faced by the industry and take necessary steps for amendment, thereby promoting growth in the International market in not only textile and apparel sector but other sectors like engineering, pharmaceuticals, IT, construction & infrastructure, etc.”

Fibre2fashion News Desk - India

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