Bangladesh RMG sector calls for tax relief, incentives in FY25 budget

The industry is requesting the government reduce the source tax on exports from the current 1 per cent to 0.5 per cent and maintain this rate for the next five years. This follows an increase in the source tax on export earnings to 1 per cent in the FY2022-23 budget.

Manufacturers argue that the post-COVID-19 economic environment, coupled with ongoing conflicts like the Russia-Ukraine and Israel-Palestine wars, has prolonged global economic instability, negatively impacting retail sales of readymade garments (RMG) even as they warn that a slowdown in the global economy may persist into 2024, putting further pressure on the export sector and foreign exchange reserves.

During this critical period, RMG manufacturers believe that reducing the source tax to 0.5 per cent would help address these challenges and encourage exporters to boost their export volumes. They are also asking for a reduction in the income tax deduction on cash incentives from the current 10 per cent to 5 per cent, arguing that rising bank loan interest rates, fuel shortages, increased raw material and transportation costs, and higher oil and gas prices have made it difficult to maintain production capacity.

The global economic slowdown has led to reduced export orders from foreign buyers and requests for slower shipments, causing liquidity issues for exporters. The RMG manufacturers emphasised that policy support is essential to sustain their operations in these challenging times.

They have also sought a reduction in the corporate tax rate to 12 per cent for the industry at all levels of taxation and exemption from VAT on certain locally sourced goods and services.

The apparel makers also requested a waiver of the 7.5 per cent VAT on sourcing raw materials for recycled fibres and another 15 per cent VAT on the purchase of those fibres by spinning mills. They proposed duty-free or concessional imports of solar and electrical machinery to modernise factories and save operational costs.

Additionally, they called for the adoption of a Harmonised System (HS) for imports, a standardised method for classifying traded products.

SM Mannan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), stated that they want a business-friendly budget for FY25.

“We met the Prime Minister and presented our demands. We want to reduce the source taxes to 0.5 per cent for the betterment of the industry,” he said, also advocating for continued policy support and food rationing for RMG workers.

Fibre2Fashion News Desk (DR)