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Source tax on apparel export to be reduced

The National Board of Revenue is likely to reduce source tax on proceeds from all export items, including apparels, to 0.25 percent to help increase competitiveness of local products in international markets.

An NBR annual report mentioned that the tax authority got Tk 2,136 crore in fiscal 2016-17 from the source, up 17 percent from Tk 1,811 crore a year ago. The tax cut will cause a loss of quite a good amount of revenue.

Bangladesh gov cut source tax on export of apparel products
Figure: Source tax on apparel export to be cut so that entrepreneurs can implement the new wages for garment workers.

However, it is considered to cut the tax at source so that entrepreneurs can implement the new wages for garment workers.

Basically, the move came followed the demands from garments and knitwear manufacturers and exporters after the withholding tax on export earnings went up to 1 percent on the first day of July because of expiry of reduced source tax benefit on June 30 this year.

The tax authority reduced advance or source tax on export earnings of readymade garments twice last fiscal year — from 1 percent to 0.60 percent to 0.25 percent– in the face of demands from apparel markers.

Apart from garments, jute goods were enjoying 0.60 percent withholding tax on export proceeds since July 1, 2016. The reduced rate ended on June 30, 2019.

The source tax on export proceeds from jute goods is also likely to be reduced to 0.25 percent for the current fiscal year. A notification in this regard will be published soon.


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