In its draft proposal for the financial year 2022-23, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) demanded continuation of the existing source and corporate tax rates for another five year to help the industry cope with emerging challenges. The current source tax is 0.50 per cent while the corporate tax is 10 per cent and 12 per cent for green and other garment factories respectively. The industry is facing a number of problems like liquidity, second COVID-19 wave and new virus variants. It will have to invest a huge amount of money for remediation and retrofitting of factories, says BGMEA.

The industry is facing challenges like a 2.22 per cent decline in prices, increase in production costs and freight and other utility changes. It is also facing an erosion of duty benefits in major markets like the EU. To help the sector face these challenges, the current source and corporate tax rates need to be maintained. Value added taxes for subcontracting factories also need to be withdrawn in addition to the existing 10 per cent advance income tax on cash incentives given by the government against export earnings.

BGMEA also demanded a waiver of the VAT facility, relaxation of the provision of mandatory inclusion of harmonized system of codes in bond licence in releasing imported raw materials under the bonded facilities. The BGMEA also proposed allowing import of industrial racking system, industrial thermostat dehumidifier and other safety equipment with a reduced tax rate to secure more global orders, arguing that the buyers are putting pressure to install the system.