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Budget for FY23: Textile and apparel exporters want continuation of existing supports to recover

With a view to retain present export growth momentum and fully recover from the Covid-19 pandemic, country’s apparel and textile manufacturers want continuation of existing rates including corporate and source Taxes and exemption of import duty on manmade fiber in the next budget for the fiscal year 2022-23.

Bangladesh-textile-apparel-demand-budget-22-23
Figure: To retain present export growth momentum – country’s top textile and apparel associations present their demands for next budget for the fiscal year 2022-23.

BGMEA’s proposal for Budget FY23

The platform of the readymade garment (RMG) exporters called for continuation of existing corporate Tax and source Tax for the next five years to overcome Covid-19 induced shocks as well as retain the present growth trend.

Currently, apparel exporters have to pay 0.5% source Tax and 12 percent corporate Tax, which is 10% for the green factory owners.

“Prices of raw materials and other logistics went up sharply, while the global crisis is posing a threat to export stability. While the Covid-19 pandemic related shocks are yet to be overcome,” BGMEA president Faruque Hassan argued in materializing their demands.

Exports are doing better and in the way of recovering from the Covid-19 pandemic. We are facing a liquidity crisis and soaring raw materials prices expedited the sorrows, said Hassan.

It is important to provide policy support and continue existing trade benefits to recover fully from the pandemic, he added.

FY23-budget-demand-BGMEA-BTMA-BGAPMEA
Figure 2: FY23 budget demand of BGMEA, BTMA and BGAPMEA.

On top of that, apparel exporters also sought withdrawal of 10% income Tax on cash incentives against export earnings in the next budget for FY 2022-23.

Currently, exporters enjoy 4% cash incentives against non-traditional markets, while 1% in all markets.

In addition to this, BGMEA demanded Value Added Tax (VAT) withdrawal on raw materials or services collected through local sources and used for export-oriented goods.

Textile millers want VAT cut on all kinds of yarn

Bangladesh Textile Mills Association (BTMA), the platform of the country’s textile millers, urged the NBR to set VAT on all kinds of yarn regardless of fiber at Tk3 per kilogram in the next national budget for fiscal year 2022-23.

Under the existing rules, a miller has to pay Tk6 as VAT for a kilogram yarn made of manmade fiber and other fiber.

“Demands of goods made of manmade fiber and recycled fiber is growing very fast. It is becoming more popular to consumers due to its comfort, fanciness, and comparatively reasonable price,” Mohammad Ali Khokon, president of BTMA said.

Taking the issue into consideration as a part of the government’s priority of product diversification, the NBR should set VAT at Tk3 on yarn made of manmade fiber and recycled fiber, said Ali.

It also called to withdraw 15% VAT and 5 percent advanced Tax on pet chips (textile grade), therapeutic acid, and ethylene glycol.

Besides, the organization also urged the government to keep Tax at source at 0.5% and treat it as final settlement.

On top of that, BTMA demanded withdrawal of 2 percent Tax on cotton purchase from local sources.

It also asked to increase the waste of cotton from 10 percent and 12 percent to 17 percent and 30 percent to produce carded and combed yarn.

The platform of the primary textile sector also demanded to keep the income Tax for the sector at 15% till 2026.

On the other hand, investment is encouraged in the manmade fiber by the apparel makers due to rise in demands of these products, said the proposal.

So, to encourage long term investment, the government should increase the deadline of the existing income Tax rate till 2026, it added.

Meanwhile, BTMA wants duty and Tax free imports of fiber including recycled fiber used in spin manufacturing.

As there is no scope of misuse, the textile millers called for imposing 1% duty on imports of spare parts for the next budget, said the BTMA leader in the budget proposal.

Currently, the sector has to pay 26.2% to 104.68% import duty on spare parts used in textile mills. However, they have to pay 1% duty on import of capital machinery.

Accessories makers want exemption of corporate Tax

In bid to recover from the Covid-19 fallout, garment accessories and packaging products manufacturers demanded the government to withdraw corporate Tax for the next three year in the next fiscal year 2022-23.

The deemed exporters also called for reducing Tax at source to 0.25 percent from 0.50% and fix it for next three years as final Tax.

Apparel accessories makers have to pay 32.5% corporate Tax and 0.50% Tax at source.

In our apparel exports, garment accessories played an important role in export earnings. It is an integral part of the sector and it is procured through back to back letter of credit (LC). Due to the supply chain disruption, the prices of raw materials rose by up to 800%,” Mohamad Moazzem Hossain Moti BGAPMEA president, said in the budget proposal.

But the global retailers and brands did not increase the prices of goods, which led manufacturers to incur losses, said Moti.

In the given context, it is difficult for the manufacturers to pay 0.50 percent Tax at source as well as 32.5 percent corporate Tax, said the business leader.

As policy support to help recovery from the pandemic, the government should reduce Tax at source to 0.25 percent and withdraw corporate Tax for next three years, said Moti.

Meanwhile, the accessories makers also called for cash incentives against the deemed exports of accessories products.

According to BGAPMEA, in the fiscal year 2020-21 the sector earned $7 billion through deemed export of garment accessories and packaging goods.

Out of this amount, nearly $1 billion is exported directly to Turkey, Netherlands, South Africa, Pakistan, India, Middle East, Ethiopia, Indonesia, Italy, Sri Lanka, Turkmenistan, Germany, Austria etc. Investment of this sector is about Tk35000 crore and value addition is about 40%.

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