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Bangladesh RMG sector seeks VAT relief

Bangladesh’s garment manufacturers and exporters want full exemption from paying value-added tax on different service charges for export-oriented sectors, particularly readymade garment industries. They want a withdrawal of VAT on bills for utility consumption including gas, electricity and water, since the export-oriented readymade garment sector is completely VAT-exempted as per a 1991 act.

Service providers collect VAT at different rates ranging from 1.5 per cent to 15 per cent with service charges. Currently, export-oriented industries enjoy 80 per cent VAT waiver on electricity and gas bills and 60 per cent on water bills. But entrepreneurs have to pay full VAT with bills and later get rebate from the revenue board which is very time-consuming and complex. Factory owners say they have to employ additional manpower for the purpose and have to spend a huge amount of money for receiving the services as part of regular production activities.

Their argument is such exemption on service charges will facilitate the sector to grow and maintain competitiveness in the global market. Bangladesh’s exports of apparel products experienced negative growth in the first few months of this year while its competitors like India, Vietnam and Pakistan posted significant growth. The price of Bangladeshi apparel items went down in the global market while the cost of production increased by almost 18 per cent in the last two years.

 
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