Apparel exporters demand cut in source tax

Apparel exporters have sought a host of tax benefits, including bringing down the tax deducted at source and withdrawing income tax levied on cash incentives in the upcoming fiscal year, in a bid to help the garment industry deal with the current economic stress.

The proposals are aimed at retaining the growth in apparel exports and the country's competitiveness in the global market, said the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

Tap here to add The Daily Star as a trusted source

BGMEA President Faruque Hassan placed the proposals during a meeting with the National Board of Revenue (NBR) at the latter's headquarters in the capital's Agargaon on Tuesday.

The Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and the Bangladesh Textile Mills Association (BTMA) also placed their budget proposals separately at the meeting chaired by NBR Chairman Abu Hena Md Rahmatul Muneem.

The BGMEA said the garment sector is facing a new challenge owing to the deep uncertainty globally stemming from the Russia-Ukraine war.

The apparel industry is losing competitiveness because of higher global inflation, a hike of the prices of yarn, chemicals, fuels, gas, and electricity, and a spike in container freight costs, it said.

According to one of the proposals, the tax deducted at source should be slashed to 0.5 per cent from 1 per cent in 2023-24. The reduced rate should be continued for five years.

"Owing to the higher tax deducted at source, exporters are finding it increasingly difficult to operate business amid the global crisis," the BGMEA argued.

The association asked the NBR to apply the current corporate tax rate during the assessment of dis-allowable expenses and other incomes.

Currently, the government has imposed a 12 per cent corporate tax on all garment industries and 10 per cent on green garment factories.

But during the assessment, the corporate tax rate applicable for private limited companies is imposed in the case of various incomes such as gains from assets disposal and dis-allowable expenses, said the BGMEA.

It said the NBR should withdraw the 10 per cent income tax imposed on the cash incentives and slashed the income tax deducted at source on the fee against the funds secured from the Export Development Fund to 10 per cent from 20 per cent.

The BGMEA said companies that don't enjoy bonded warehouse facilities should be allowed to open back-to-back letters of credit so that they can smoothly purchase inputs and raw materials from the domestic market.

A back-to-back LC involves two letters of credit to secure financing for a single transaction. It is used primarily in international transactions.

There are 1,100 factories that are members of the BGMEA, the BKMEA, and the Bangladesh Terry Towel & Linen Manufacturers & Exporters' Association that don't have the bonded warehouse facility. More than 7 lakh people work there and their combined export receipts stand at about $6.5 billion.

Users should be allowed to renew their bonded warehouse licence after every three years from two years now, said a BGMEA proposal.

NBR Chairman Muneem said the NBR would provide as much support as it needs to take the garment sector forward.

He said that once completed, the VAT and the bonded warehouse automation projects would bring more benefits to businesses.

BKMEA for continuation of current corporate tax rate

BKMEA Executive President Mohammad Hatem urged the NBR to continue the existing corporate tax rate for another five years.

The government should retain the 12 per cent corporate tax for garment industries and 10 per cent for green garment factories for the five fiscal years. The same rate should be applicable while assessing other incomes and disallowable expenses, it said.

The BKMEA demanded the removal of all duties imposed on the imports of solar panels and solar inverters with a capacity of more than 10 kilowatts, with a view to popularising renewable energies.

It recommended zero duty and VAT on the import of chemicals needed to set up effluent treatment plants.

Textile millers seek removal of taxes on fibre imports

The BTMA sought the scope to import all types of fibres, including recycled and manmade, in the upcoming fiscal year of 2023-24 without paying any duty and other taxes and any non-tariff barriers.

It requested the NBR to remove the VAT slapped on the collection of raw materials by deemed exporters to produce recycled fibres and later during the sales of the item to local millers.

It proposed VAT exemption on the fabrics manufactured from artificial fibre by power looms.

The BTMA said the provision of a 3 per cent to 5 per cent advance income tax levied on the import of machinery should be abolished.

The 2 per cent tax deducted on the payments of cotton purchased from the local sources should be withdrawn, it said.