The proposed budget for the fiscal 2021-22 failed to bring much good news for the export-oriented industries of the country.
There has been no decline in tax at sources of export earnings, existing taxes on exporters, or the corporate tax rate on export organisations. But exporters are hopeful their demands will be heard before the budget is passed.
The proposed budget, placed at parliament on Thursday by Finance Minister AHM Mustafa Kamal, did not reflect many of the key demands of the country's exporters, including renewed incentives for the export of readymade garment products made of specialised man-made fabrics.
However, entrepreneurs in the sector said they are hopeful their proposals will be taken into account when the budget is passed.
"The tax at the source of readymade garment export earnings will be reduced from the existing 0.5% to 0.25%," Md Shahidullah Azim, vice-president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told The Business Standard (TBS).
"In addition, a 10% cash assistance will be provided for the export of garment products made of man-made fibre to encourage product diversification," he said.
Tax at source for all types of export products including readymade garments was increased from 0.25% to 0.5% for the FY2020-21.
The BGMEA and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) have proposed decreasing source taxes to 0.25% in FY22.
Also, the country's textile sector proposed a decrease in the existing VAT on man-made fibre from Tk6 per kg to Tk3 like other cotton yarns, but it was not reflected in the budget.
Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association (BTMA), told TBS that the organisation had proposed some tariffs and VAT-related benefits on man-made fibre yarn. But it was not reflected in the proposed budget.
"We will write again [asking the government] to consider these proposals before the budget is passed," he said.
They also demanded the withdrawal of income tax on existing incentives imposed on exports. In addition, they asked for cash incentives to encourage the export of garments made of synthetic fibres.
Meanwhile, the existing tariff on the import of some fire extinguishers from industrial plants has been reduced. The list includes equipment including sprinkler, busbar trunking system.
The country's export sector has been hit hard by the Covid-19 pandemic. In the fiscal 2018-19, Bangladesh exported goods worth $36.67 billion to the world market. The sector saw a 10.55% growth.
But, with the onset of the Covid-19 in the country, exports declined 16% to $33.67 billion in the last fiscal year.
Exports were expected to bounce back in the current 2020-21 FY, but the second wave of coronavirus has slowed down the growth again. However, from July to May of the current financial year, Bangladesh saw a 13.64% increase in exports to $35.18 billion. About 83% of the total exports earnings come from the readymade garments sector.