Bangladesh Garment Manufacturers and Exporters Association (BGMEA) on Thursday urged the government to reduce the tax at source on export of RMG items to 0.5 percent from existing 1 percent.
The apex body of the country’s apparel industry urged to keep the source tax at 0.5 percent for the next five years.
“It will allow entrepreneurs to confidently adopt medium-term business and investment plans,” BGMEA President Faruque Hassan said at a press conference on the overall situation of the garment industry on Thursday.
At the press conference, the country’s top apparel export body called on the government to provide policy support amid the ongoing economic downturn.
“During the assessment of the RMG industry, other income such as gain on assets disposal, sub-contract income, and miscellaneous expenses should be treated as disallowable, and a corporate tax rate of 12 percent should be imposed instead of the normal rate (30 percent),” the BGMEA President said.
At the beginning of the press conference, Faruque Hassan highlighted the current scenario of apparel export.
“In the last six months, we have seen some growth in exports. However, the export has declined mainly due to the increase in the cost of production, which is clearly seen in our export statistics.”
“And in the last two months of this year, March and April, our garment exports have also gone negative in terms of price. Our exports declined by 1.04% in March, and by 15.48% in April,” he said.
According to the Export Promotion Bureau (EPB), RMG exports reached $38.57 billion during the July-April of 2022-23 fiscal year, reflecting a 9.09% increase compared to the same period in the previous fiscal year.
Regardless of the overall positive trend, a more detailed inspection of single month statistics reveals a recent decline in apparel export growth.
In April, the country's RMG exports witnesses a significant decline by 15.48%, amounting to $3.32 billion compared to April 2022.
“Yesterday, we met with the international buyers' representative of Bangladesh, namely Buyers Forum, for the first time at the BGMEA office. We asked them about the 2023 projection. But they didn't give us a very promising projection. Instead, they see the slowdown in retail sales, access inventory and supply chain crises as major problems across Europe and the United States.” BGMEA president said.
During the press conference, he called on the authorities to reduce the income tax deduction rate at source from 20 percent to 10 percent on fees paid by RMG exporters for promotion and development from the Exporter Retention Quota Fund.
The BGMEA president also highlighted the lack of diversification in products in the country’s RMG export.
“According to exports in 2021-22, about 73% of our total garment exports were made of cotton, compared to 69% in 2008-09, which means that the cotton dependence of our industry has increased in the last 10 years.”
While non-cotton accounts for about 75% of the world's total garment use, only 26% of our exported garments are made of non-cotton material, he added.
The BGMEA chief demanded a 10 percent special incentive on non-cotton garments export in FY2023-24 in an effort to encourage more export through investment in the non-cotton sector.
The BGMEA chief demanded the withdrawal of the 10 per cent tax on cash assistance saying that it’s logical to keep the cash incentives out of the tax net as it is not an income through business.
Referring to the rising demand in circular fashion and recycled products, the RMG export body urged the government to waive 7.5% and 15% VAT, respectively, on the collection of raw materials used by the recycle fiber mills established at the local level and the supply of those recycled fiber to local spinning mills.
They urged the government to provide proper classification and duty-free facilities for import of raw materials of all types of garment waste or recycle fiber producing mills, including cotton waste, keeping in mind the interest of local industry.