STAR BUSINESS REPORT

Garment exporters yesterday urged the government to cut the source tax from 1 percent to between 0.5 and 0.65 percent, citing ongoing difficulties caused by domestic challenges and external pressures.

They also proposed keeping the reduced rate in place for the next five years.

In addition, they called for exemption from the 10 percent income tax on export incentive receipts, saying that export incentives have already been reduced as part of preparations for Bangladesh’s graduation from the least developed countries (LDC) group.

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) made these proposals in their budget recommendations for fiscal year 2026-27 (FY27), which were submitted to the National Board of Revenue (NBR) yesterday.

Both associations proposed setting the corporate tax rate for subcontracting factories at 12 percent instead of the current 25 to 30 percent, arguing that it should be aligned with existing policies where green factories pay 10 percent and non-green factories pay 12 percent.

They also said subcontracting factories, which place work orders with other factories, currently pay a 5 percent source tax on contract payments and demanded that it be reduced to 1 percent in the upcoming budget.

In addition, they proposed fixing the bond licence fee at Tk10,000 for three years, along with relaxed rules for sub-contracting and bond licence locking.

They also recommended exempting VAT and import duties on the import of man-made fibre and non-cotton yarn, saying this is necessary to expand production using man-made fibres and increase global market share.

Globally, around 75 percent of garments are made from man-made fibres, while in Bangladesh, over 70 percent of exports are cotton-based and only