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 Finance Minister AHM Mustafa Kamal in his last year budget speech, 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, export-oriented RMG industry will continue to enjoy additional 1.0 per cent cash incentive and existing 10 per cent (green factories) and 12 per cent corporate tax rate for next one and two fiscal years respectively.
The finance minister on Thursday in his budget speech said exports of goods and services, including that of RMG, have faced a downturn due to the outbreak of the COVID-19 pandemic.
He proposed to amend the Ordinance 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 0.25 per cent.
The minister also said an additional 1.0 per cent export incentive is being provided to all categories of RMG exports from FY2019-20 and proposed to continue with this additional export incentive of 1 per cent in the next fiscal year in addition to existing other incentives.
At present, the RMG factories having green building certification enjoy a special tax rate of 10 per cent, whereas RMG factories without such certification pay taxes at a rate of 12 per cent. The facility will 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 the import of RFID tag and industrial racking system to 15 per cent from existing 25 per cent to promote export-oriented garment and textile industries.
In addition, the existing provisions of bonded warehouse licencing rules will be rationalised to ensure proper utilisation of bond facilities.
To encourage local textile industries, it proposed to impose fixed VAT at the rate of Tk 6 per kg from the existing 5.0 per cent ad valorem VAT on polyester, rayon and all other synthetic yarn, and at the rate of Tk 3 per kg from the existing Tk 4 per kg on all kinds of cotton yarn.
