BGAPMEA for reducing export source tax to 0.25pc

Staff Reporter :
The Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA) has demanded for reducing source tax on export to 0.25 per cent from current 1.0 per cent for the next five years.

The association came up with the demand in a letter sent to the National Board of Revenue (NBR) last week.

In the letter, the BGAPMEA President Md Moazzem Hossain Moti said the sector is passing through hard time amid the slowed economy caused by the ongoing Russia-Ukraine war and the market will be more competitive after 2026 as the country is going to graduate from the LDC.

Under this circumstance, the source tax on export of garment accessories and packages should be cut down to 0.25 per cent from the existing 1 per cent for five next years to encourage the entrepreneurs of the sector, he said.

Wishing anonymity, an official of the NBR said that they have received the letter but yet to be taken any decision in this regard.

The entrepreneurs invested more than Tk 40,000 crore in the sector in the last 15 years and around seven lakh people are engaged in the industry. Export earnings amount to more than $7.5 billion, according to the association.

It also said lead time has improved a lot as garment exporters can procure accessories and cartons directly from local markets, cutting the waiting time that would have otherwise needed in case of imports.

Fabric and accessories are two major raw materials for the RMG industry, while some 1,900 accessories and packaging makers meet almost all demands of the RMG sector, it said.
Accessories factories in many cases buy raw materials from the domestic market through back-to-back letter of credit (LC) and export.

The local accessories makers meet more than 90 per cent of the country’s readymade garment (RMG) sector’s demand and also that of the pharmaceuticals, leather, frozen fish and agro-based industries, especially in the form of packaging products.

The local RMG sector now imports only 5-10 per cent of the accessories as referred to by
the buyers while the rest of the demand is sourced locally. Add to it the 20 per cent of the accessories now directly being exported to the global market.

But, for the sake of helping the sector flourish further, the government should come forward with policy support including cash incentive, cut in corporate tax rate and funds at low interest rates, especially for the SMEs (small and medium enterprises), the sector insiders said.

Unless the support is there, it will stunt the growth of the readymade garment (RMG) sector’s very import backward linkage industry, they added.