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Government cuts source tax to 0.25% for RMG

In a bid to boost the export earnings from the readymade garment sector, Bangladesh government has cut source tax on export of apparel products to 0.25% from 0.60% for the fiscal year 2018-19.

The National Board of Revenue (NBR) on Wednesday issued a Statutory Regulatory Order (SRO) by bringing the change to its earlier SRO, which set the tax at source at 0.60% for the current fiscal year.

Bangladesh gov cut source tax on export of apparel products
Figure: The recent budgetary proposals would affect the $50 billion export earnings target from the RMG sector by 2021. Courtesy: Reuters

Since the RMG sector contributes over 83% of total export earnings, the government has taken the decision to reduce the rate to help to reduce the production cost and to remain competitive in the global markets, stakeholders said talking to Textile Today.

“There was strong demand from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) to cut the rate of tax at source as they have to implement the new wage structure from December,” an official of the NBR told the Textile Today, who preferred not to be named.

On September 13, the Bangladesh government set Tk8,000 as the minimum monthly wage, with Tk4,100 as basic salary, for the country’s apparel workers.

In the last couple of years, production cost has increased but the buyers did not increase the prices of products. Such a decision of the government will be very helpful for the sector and they will be able to earn more.

Abdus Salam Murshedy, President, Exporters Association of Bangladesh

The new wage structure has become effective from December 1, 2018, and the workers will receive from January this year.

He also said the government considered the request of the manufactures as the production cost went up due to spending on safety standards improvement, while they have to pay more to implement the new wage.

According to Export Promotion Bureau (EPB) data, in July-December period of the current fiscal year 2018-19, Bangladesh earned $17.08 billion, up by 15.65%, which was $14.72 billion in the same period of last fiscal year. In July-December, RMG exports contributed $17.08 billion or 83.34% to national export of $20.50 billion.

RMG manufacturers welcomed the decision as it will help the sector to reduce production cost, while it would ultimately make them more competitive in the global markets.

“Definitely, it is a great support from the government to the country’s apparel exporters, which would help Bangladesh to earn more from the garments export,” Exporters Association of Bangladesh (EAB) President Abdus Salam Murshedy told the Textile Today

In the last couple of years, production cost has increased but the buyers did not increase the prices of products. Such a decision of the government will be very helpful for the sector and they will be able to earn more, said Salam, a Former President of BGMEA.

He also urged the government to continue the rate for the next few years so that Bangladesh can achieve the export target of $50 billion by 2021 when the nation will celebrate its golden jubilee of independence.

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