The Bangladesh Government has brought major changes in its tax structure for export-oriented industries and has given a major consideration to the cost-cutting for the apparel industry.
Source tax for export items has been brought down to 0.60 per cent. Also, the corporate tax for the readymade garments industry has been lowered to 12 per cent. Separate gazette notifications have been published in this regard which effectuated the date of implementation from July 1, 2018.
During the budget for fiscal 2018-19, Bangladesh Government hiked the source tax for garments industry from 0.7 per cent to 1 per cent. The move had drawn strong criticism from the apparel manufacturers. Although now it has been brought down to 0.6 per cent, this will not be applicable for jute and jute-made products.
In terms of the corporate tax structure, the 2018-19 budget proposed a hike for garment factories. It proposed a flat 15 per cent tax for all factories and 12 per cent for those certified as green factories – up from 12 per cent and 10 per cent respectively. Now, following the gazette, the previous structure has been brought back.
Mohammed Nasir, Vice President (Finance), Bangladesh Garment Manufacturers and Exporters’ Association (BGMEA), has lauded the government’s move to reduce tax for apparel factories as the industry had been brewing with discontent with the hiked structure.
Last fiscal year, the apparel industry of Bangladesh earned US $ 30.61 billion, which is 83.5 percent of the total export receipts for the year. Apparel makers had been saying that the hiked tax structure was choking the factories which are now struggling to survive amid the rising costs of business and production.