Withdrawal of 2pc AIT on cotton import crucial

Business Report :

Bangladesh’s textile industry leaders have issued a stark ultimatum to the interim government, demanding the immediate withdrawal of the newly imposed 2 percent Advance Income Tax (AIT) on raw material imports by Monday, 7 July.
Industry stakeholders warn that failing to do so face factory closures, job losses, and a sharp decline in exports, threatening the backbone of the country’s economy.
At a press conference held on Saturday at Gulshan Club, Dhaka, the Bangladesh Textile Mills Association (BTMA) leadership-including Vice Presidents Abdullah Al Mamun and Saleudh Zaman Khan, as well as President Showkat Aziz Russell-united in voicing grave concern over the financial pressure the new tax will inflict on the sector, which contributes over 80 percent of the country’s total export earnings.
“The 2percent AIT on raw materials like cotton and man-made fibers will not only disrupt cash flows but also severely hamper operational sustainability,” said Abdullah Al Mamun.
“With mounting energy costs, high-interest bank loans, elevated wage levels, and declining export incentives, this tax could be the final blow for many mills already struggling to stay afloat.”
Mamun emphasized the impracticality of the government’s claim that the tax is adjustable. “In reality, once the money goes to the government exchequer, getting refunds is nearly impossible. Millers will be forced to take fresh loans just to clear raw materials now stuck at ports.”
He warned that the effective tax burden could skyrocket to nearly 59percent when all tax components-including corporate tax, AIT, VAT, and other surcharges-are combined.
This would place Bangladesh’s textile sector at a steep disadvantage compared to regional competitors like India, Vietnam, and Pakistan, which are offering fiscal incentives and energy subsidies to boost their industries.
“This tax policy will push 90percent of textile millers to consider exiting the business,” Mamun added.
BTMA President Showkat Aziz Russell echoed this sentiment, stating, “My own denim factory is no longer viable under this tax regime. It makes more financial sense now to import yarn from India than to buy from local mills. This policy will cripple domestic production and deepen our reliance on imports.”
Saleudh Zaman Khan further alleged that “vested quarters” may be influencing policy decisions aimed at destabilizing the domestic textile ecosystem. “This is a deliberate sabotage of one of our strongest economic sectors.” The BTMA also drew attention to other compounding issues, including severe gas shortages, electricity rationing, and reduced policy support from the government-factors that have already slowed production and exports.
Backing the BTMA’s stance, several trade bodies-including the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and the Bangladesh Terry Towel and Linen Manufacturers and Exporters Association (BTTLMEA)-also urged the government to urgently revoke the AIT and reconsider recent VAT hikes.
Industry leaders warned that unless corrective measures are taken by Monday, July 7, the sector could face an irreversible crisis that would undermine years of industrial progress and jeopardize employment for millions.