The proposed budget for the fiscal year 2022-23 drew mixed reactions from the country’s textile, apparel makers and garment accessories producers as some of the demands remain unmet.
They are happy with the corporate tax rate, which will attract more investment to attain the government target to increase investment to GDP to 31 per cent.
But exporters are unhappy with the proposed rise in source tax to 1 per cent in FY23 from existing 0.50 per cent as it will hinder export growth.
Textile Sector
Fabric and yarn manufacturers got a good response in the proposed budget as the government offered some policy measures, which will help the industry to grow.
In the proposed budget for FY23, the government proposed to waive 15 per cent Value Added Tax (VAT) on pet chips at production and sales level.
This move is aimed at encouraging new investment to help to produce raw materials locally, which will ensure supply to the export oriented garment industry. The new investment will also help to generate new employment.
Government also proposed to withdraw 5 per cent advance import tax from Terephthalic Acid, Ethylene key ingredient of pet chips.
The budget for FY23 also gave the option to import spare parts for the industry at a rebated rate.
On top of that, the government reduced VAT on yarn from man-made fibre and other fibres from Tk6 per kg to Tk3 per kg. It is to help diversify products to non-cotton products and penetrate new markets.
Meanwhile, the government also proposed to keep 15 percent corporate tax for the textile sector till 2025. This will encourage investment and make taxpayers eager to pay duly.
It also declared to continue cash incentives for the sector, which will be great incentives for the industry to grow.
However, imposition of 5 per cent import tax on imports of transmission or conveyor belt is a barrier for the industry in the way of expansion. It was duty free in the current budget.
“The proposed budget for the FY23 is an investment friendly for the country’s textile sector. With the proposed benefits, the sector will be able to contribute more in the economy and expand business, said Mohammad Ali Khokon, President of Bangladesh Textile Mills (BTMA).
But there are two issues such as 1 per cent source tax and imposition of 5 per cent import tax on imports of transmission or conveyor belt will hinder the growth, he said urging to withdraw it.
2.5 per cent reduction of tax for publicly traded and non-listed companies is a good proposal but it should be rationalized gradually.
RMG Sector
Government kept the corporate tax rate unchanged at 12 per cent and 10 per cent for the garment sector and green factory owners respectively in the budget for Fy23. This is a comfort for the exporters.
However, the RMG sector, the lifeline of foreign currency earner, is in trouble with the proposed rise of 0.5 per cent of source tax, which will eat up competitiveness in the global market as the prices of raw materials increase sharply.
“We welcome the government decision to cut corporate tax for the non-RMG sector and keep unchanged for apparel sector. This will attract more investment,” said Bangladesh Garment Manufacturers and Exporters Association President Faruque Hassan.
However, at a time when the sector is struggling to recover amid soaring raw material prices, rise in source tax will hinder the recovery and growth of export earnings, said Hassan.
Meanwhile, the apparel sector did not get much desired 10 per cent cash incentives on exports of non-cotton products.
Currently, around 74 per cent of Bangladesh’s exported goods are cotton, while 24 per cent are non-cotton. To help the sector to increase non-cotton exports as a part of diversification the sector called for a 10 per cent cash incentive against exports in Fy23.
Another call for withdrawing 10 per cent income tax on cash incentives also remains unmet. The argument was it is not an income rather a government support to the industry to grow.
On the other hand, the budget also imposed a 1 per cent import duty on solar panels in the next budget, which is against the government’s vision of sustainable manufacturing.
“The government should scrap the duty on solar panel to encourage green manufacturing and reducing carbon emission, said BGMEA president. He argued that Bangladesh is a role model for green factory and we should not initiate such measures, which would discourage sustainability.
Non-RMG sectors
Entrepreneurs of non-RMG sectors have welcomed the decision of a massive cut in corporate tax saying that they have been urging this smart move for a long time.
Shaheen Ahmed, President of the Bangladesh Tanners Association (BTA) said that it was a very important decision to promote industries other than RMG and maintain equality with the export-oriented garment sector.
“We have been requesting this for a long time. It will help to improve our competitiveness in the current global economy and will also be helpful in reducing the trade deficit to some extent,” he added.
Garment accessories and packaging manufacturers are also happy with the uniform 12 per cent tax rate offered for the exporters in the next fiscal year as it will give a relief.
But they are not fully satisfied with the budget for FY23 as they are yet to get cash incentives against their direct exports of garment accessories and packaging products.
“In the proposed budget for FY23, the government has brought over 43 export products and services under incentives coverage. It is aimed at encouraging exports” Mohammad Moazzem Hossain Moti, president of Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA) told The Textile Today.
As per the export policy, garments accessories and packaging sector is termed fully export-oriented industry and small and medium in size, which was supposed to get the incentives as a priority sector but yet to get this type of support, said Moazzem.
For more investment and employment generation as well as export diversification, the garments accessories and packaging sector needs cash incentives, the sector people said.
In conclusion, textile, garment and garment accessories manufacturers are in the same boat to request the government to keep the source tax at 0.5 per cent for the sale of industries as the global economy is not in a good shape.
If the government considers the demands, the country will be able to post growth in exports earnings and create new employment for the people and reduce poverty.
