Sign in Subscribe
Tax law

Bangladesh Textile Industry Faces Disruption Amid Policy Changes

Strategic Insights

— 2 min read

Bangladesh's primary textile industry is bracing for a major disruption due to newly imposed tax policies, the Bangladesh Textile Mills Association (BTMA) has warned, citing urgent need for policy reversals to safeguard local spinning mills from collapse and maintain competitiveness in the global market. The association has urged the government to withdraw the 2.0 per cent Advance Income Tax (AIT) on imported cotton and revise corporate tax to 15 per cent from 27 per cent to prevent the impending crisis. BTMA President Showkat Aziz Russell said the decision to increase the AIT was made without consulting industry stakeholders and is likely to be "self-defeating" for the sector and the wider economy. The industry's working capital could deplete entirely within three years if the tax burden continues, the association cautioned.

Key Takeaways:

  • The Bangladesh Textile Mills Association (BTMA) has warned of a serious disruption to the country's primary textile industry due to newly imposed tax policies.
  • BTMA President Showkat Aziz Russell urged the government to withdraw the 2.0 per cent Advance Income Tax (AIT) on imported cotton and revise corporate tax to 15 per cent from 27 per cent to prevent the impending crisis.
  • The AIT increase was made without consulting industry stakeholders, and its implementation is likely to lead to working capital shrinkage, with the cumulative tax burden potentially reaching up to 29 per cent annually.
  • The industry's working capital could deplete entirely within three years if the tax burden continues, BTMA warned.
  • Local spinning mills will find it difficult to survive under the increased production costs and reduced competitiveness compared to regional counterparts.
  • The BTMA protested the budgetary measure for FY 2025-26, raising the specific tax on domestically produced cotton and blended yarns per kg to Tk 5.0 from Tk 3.0, emphasizing that the increased tax will push up yarn prices and discourage garment manufacturers from sourcing locally.
  • The association called on the government to support the domestic textile sector as a key partner in export growth, rather than weakening its competitiveness through abrupt fiscal measures.

Statistics:

  • 29 per cent: the cumulative tax burden potentially imposed on the industry annually.
  • 100 per cent: the capacity of local mills to supply yarn for the knit sub-sector.
  • 55-60 per cent: the capacity of local mills to supply yarn for woven apparels.
  • Tk 5.0: the new tax per kg on domestically produced cotton and blended yarns.
  • Tk 3.0: the previous tax per kg on domestically produced cotton and blended yarns.
  • $75 billion: the investment in the textile and apparel sector.
  • $100 billion: the target export earnings by 2030.

Sources:

  • Bangladesh Textile Mills Association (BTMA)
  • Letters sent to the finance and commerce advisers, the Bangladesh Bank Governor, and the Chairman of the National Board of Revenue (NBR)

Read more