To remain competitive in the global export markets, Bangladeshi apparel makers demanded 0.25% tax at source in the upcoming budget for the next five years.
Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and Bangladesh Textile Mills Association (BTMA) made the demand in their budget proposal for the fiscal year 2019-20.
The top leaders of the apparel sector placed their demands to the National Board of Revenue (NBR) at a pre-budget discussion meeting.
“During 2019 to 2018 the production costs increased by 29% due rise in workers’ wages and safety standard improvement to ensure a safe workplace. While the global buyers are gradually reducing the prices of apparel goods,” former BGMEA president Md Siddiqur Rahman said.
As a result, it has become very difficult to compete with our competitors. In the given situation, the sector needs withdrawal of tax at source, Siddiqur Rahman argued.
“If not possible, the current 0.25% source tax rate should continue at least for the next five years so that manufacturers can adjust the costs already gone up.”
Currently, the apparel exporters are paying 0.25% tax at source.
However, the apparel makers also urged the government to reduce corporate tax from 12% to 10% for the next fiscal year.
Increasing the investment to attain the $50 billion export earnings from the RMG sector, the trade association called for lowering corporate tax from 12% to 10% for the next fiscal year.
BGMEA demanded the withdrawal of Value Added Tax (VAT) and 2% stamp duty on RMG export. It also called for withdrawing VAT on export-oriented goods and services collected from local sources.
Meanwhile, in addition, Bangladesh Textile Mill Association (BTMA), the platform of the primary textile sector people wanted VAT exemption on locally manufactured fabrics and yarn as the production cost has gone up.
“Bangladesh was fully dependent on import of yarn and fabrics in meeting the local demands for both the export-oriented and local industry. But now, the sector is competing with the global market players and meeting the domestic demands,” BTMA president Mohammad Ali Khokhon said.
If the government imposes VAT on fabrics and yarn, it increases prices of fabrics and yarn leaving the manufacturers in tougher competitions, said Ali.
So, considering the present status, our demand is not to impose VAT on locally produced yarn and fabrics, he added.
Since the production cost has gone up, the sector also called to reduce corporate tax, while as the sector is paying more comparing other clothing relating sector.
Currently, the sector is paying 15% corporate, which would expire on June 30, 2019. So, to ensure a level playing field, we are urging the government to set cooperate tax at 12.5% and to continue it till 2028, said Ali.
On top of that, the knitwear manufacturers do not want to pay source tax, they want to pay 0.5% tax on Cutting Making Charge and it should be settled as final tax.
The BKMEA also demanded the continuation of 12% corporate tax for the sector and 10% for the apparel makers, who are producing goods at a certified green building.
The platform of the knitwear industry also urged the government to keep the provision of duty-free import of spare parts for the sector and keep them out of VAT preview.