The government has proposed to raise the tax at source on exports, including that of the garment sector, to 1% for fiscal year 2015-16.
Currently, the apparel makers pay 0.30% tax at source, while the other export-oriented sectors pay 0.60%.
In the last budget, the government slashed tax at source to 0.30% from 0.80% to give a cushion in the losses caused by political unrest and the RMG factory compliance issue.
Finance Minister AMA Muhith made the proposal at his budget speech in parliament yesterday.
“Our textile and garments industry including other export items are enjoying various incentives, and the tax benefits were allowed for just one year in the last budget.
“I, therefore, propose to withdraw the existing facilities and as such impose 1% tax on all export items including garments, terry towel, carton and accessories, jute and jute goods, and frozen foods,” he said.
Muhith said this tax deduction at source will be treated as the final tax liability for all export sectors.
In an immediate reaction, BGMEA president Atiqul Islam said the increase of source tax would hinder the country’s export growth raising production cost, which had already been affected by the compliance and safety issues.
RMG sector, the country’s largest industrial sector, has also faced another bottleneck as the Euro depreciated against the US dollar.
Atiqul Islam said if the hike of tax at source was implemented, the products’ competitiveness in the global market would suffer.
He said they would meet the prime minister and finance minister to keep the source tax within 0.30%.
“If the government provides us policy support as was given in the previous budget, the (RMG) sector will be able to create more job opportunities and contribute to the economy, helping the country raise its status to a middle-income nation,” the BGMEA chief said.
