The government has proposed to double the source tax to 0.5 per cent from existing 0.25 per cent for all export oriented sectors including the readymade garment (RMG) industry for the upcoming fiscal year of 2020-21.
Earlier, the government proposed 1.0 per cent source tax for all export sectors for the current fiscal year of 2019-20.
Later, the National Board of Revenue (NBR) through a statutory regulatory order slashed the source tax on export proceeds for all sectors, including RMG, to 0.25 per cent effective from October 21, 2019 up to June 30, 2020.
Besides, RMG industry will continue to enjoy additional 1.0 per cent cash incentive along with existing 10 per cent (green factories) and 12 per cent corporate tax rates for next one and two fiscal years respectively.
The finance minister in his budget speech on Thursday said exports of goods and services, including that of RMG, have faced a downturn due to the ongoing Covid-19 pandemic.
"I, therefore, propose to reduce the rate of withholding tax on export proceeds as a part of extending overall support to our export sector," he said.
He proposed to amend the ordinance concerned to fix the rate of withholding tax on all sorts of export proceeds, including that of RMG, at 0.5 per cent instead of the existing rate of 1.0 per cent.
The minister said an additional 1.0 per cent export incentive has been provided to all categories of RMG exports from FY 2019-20. He proposed to continue this additional export incentive of 1.0 per cent in the next FY also in addition to other existing incentives.
At present, the RMG factories having green building certification enjoy a special tax rate of 10 per cent, whereas the RMG factories without such certification pay tax at a rate of 12 per cent.
The facility was scheduled to expire on June 30 next. The minster has proposed to extend the facility for another two years.
The budget also proposed to reduce the existing duty rate on import of RFID tag and industrial racking system to 15 per cent from the existing 25 per cent to promote export-oriented garment and textile industries.
In addition, existing provisions of the bonded warehouse licensing rule will be rationalised to ensure proper utilisation of bond facility.
To encourage local textile industries, it proposed to impose fixed VAT at the rate of Tk 6.0 per kg from the existing 5.0 per cent ad valorem VAT on polyester, rayon and all other synthetic yarns, and at the rate of Tk 3.0 per kg from the existing Tk 4.0 per kg on all kinds of cotton yarn.
The minister explained that due to the growing trade tensions and recession in the world economy, a downturn in global goods trade in 2019 and 2020 has been forecasted. Therefore, overall exports from Bangladesh, including that of RMG, are continuously declining.
Due to fall in demand in the developed countries, RMG export this year is showing a negative trend compared to the previous year, he said, forecasting further reduction in exports in the coming days following the global lockdown amidst the coronavirus outbreak.
He, however, expected that local RMG industry will see a rebound with the support from the stimulus packages, being offered by the government to counter the coronavirus pandemic impact, and export will return to desired positive trend in FY '21.
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