Govt to extend tax holiday facility to 7 new sectors
Business leaders welcomed the move, saying it will be helpful to diversify the export basket
New sectors to come under tax holiday facility
- Artificial fibre or manmade fibre manufacturing
- Automobile parts and components manufacturing
- Automation and robotics design and manufacturing, including parts and components thereof
- Artificial intelligence-based system design or manufacturing
- Nanotechnology-based products manufacturing
- Aircraft heavy maintenance services, including parts manufacturing
- Electrical transformer manufacturing
The government has plans to extend the tax holiday facilities at least to seven new sectors as it aims to attract foreign directive investment as well as diversify exports.
Business leaders welcomed the move, saying it will be helpful to diversify the export basket and strengthen the backward linkage industries.
They also demanded duty-free raw material import facilities to capitalise on the tax holiday advantage.
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Seeking anonymity, finance ministry officials said the sectors that will be included in the tax holiday facilities are artificial fibre or manmade fibre manufacturing; automobile parts and components manufacturing; automation and robotics design and manufacturing, including parts and components thereof; artificial intelligence-based system design or manufacturing; nanotechnology-based products manufacturing; aircraft heavy maintenance services, including parts manufacturing; and electrical transformer manufacturing.
They said in the upcoming budget, it will be proposed to amend Section 46BB of the income tax ordinance 1984. The amendment will mention inclusion of the seven new sectors, along with the exixting 26, in sub-section (2) of clause (a).
"We welcome the government move. But if we want to cash in on the full advantage of a tax holiday, the government should allow import of those raw materials under the duty-free facility. Otherwise, cost of production will be higher," said Mohammad Ali Khokon, president of Bangladesh Textile Mills Association (BTMA).
Many industries will grow under this initiative as Bangladesh has a good demand for alternative yarns and a lot of fancy fabrics, he added.
Currently, Bangladesh can meet less than 10 percent of manmade fibre's demand, according to the BTMA.
"The government should be allowing tax holiday facilities to value-adding industries to strengthen backward linkage industries," Khokon said.
Siddiqur Rahman, former president of Bangladesh Garment Manufacturers and Exporters Association, said it is a good initiative as manmade apparel items have a big market globally and that is increasing every year.
"If such fabrics are available here, the buyers will come," he said.
"We think the government has made the right move. As the second-largest apparel exporting country, we are still dominating in cotton-based products while demand for cotton items is decreasing globally," Sheikh Fazle Fahim, president of the Federation of Bangladesh Chambers of Commerce and Industries (FBCCI), said.
"If we can cash in on the facility, it will be helpful to diversify our apparel export basket. Within two years, Bangladesh will secure a stronger position," he said.
Fahim also said artificial intelligence will play a big role in the coming days and that is why it is important to attract more investments in that area.
Bangladesh is scheduled to sign a memorandum of understanding about nanotechnology with Singapore this year. Singapore is one of the leading countries in nanotechnology.
The FBCCI president hoped the new move will help attract investments in Bangladesh.
"The light engineering industry will be benefited by the new move as the country will enjoy new investments in the automobile parts and components manufacturing sector," Fahim said.
He said a number of foreign motorcycle manufacturing companies had already started production in Bangladesh.
"Not only aircraft heavy maintenance services, including parts manufacturing sector, the government is also keen to provide various facilities for aviation, tourism and hospitality sector," said the FBCCI president.
Under the current provisions of the income tax ordinance, these industries will enjoy tax holidays for five to ten years on condition.
If the selected industries are set up in Dhaka, Mymensingh and Chattogram – excluding Dhaka, Narayanganj, Gazipur, Chattogram, Rangamati, Bandarban and Khagrachhari – divisions for a period of five years, beginning with the month of commencement of commercial production of the said undertaking, their tax exemption rate will be 90 percent for the first year and 20 percent in fifth year.
If the industries are set up in Rajshahi, Khulna, Sylhet, Barishal and Rangpur divisions (excluding city corporation areas), and in Rangamati, Bandarban and Khagrachari districts, the tax holiday facility will be applicable for ten years, beginning with the month of commencement of commercial production. Their tax exemption rate will be 90 percent for first year and 10 percent in tenth year.
The industries that currently enjoy tax holiday are active pharmaceuticals ingredient and radio pharmaceuticals; agriculture machinery; automatic bricks; automobile; barrier contraceptive and rubber latex; basic components of electronics (resistor, capacitor, transistor, integrated circuit and multilayer printed circuit board etc.); bi-cycle including parts thereof; bio-fertiliser; biotechnology-based agro products; boiler, including parts and equipment thereof; compressor, including parts thereof; computer hardware; furniture; home appliances (blender, rice cooker, microwave oven, electric oven, washing machine, induction cooker, water filter etc.); insecticides or pesticides; leather and leather goods; LED TV; locally-produced fruits and vegetables processing; mobile phones; petrochemicals; pharmaceuticals; plastic recycling; textile machinery; tissue grafting; toy manufacturing and tyre manufacturing.
