Special Correspondent :
Leaders of Bangladesh Textile Mills Association (BTMA) have demanded 15 percent cash incentives from the government to offset losses stemming from rise of wages and prices of basic raw materials.
They also demanded reduction of income tax on textile mills under Company Act and VAT exemption for all the locally produced textile goods, including yarns, fabrics, clothes and processed fabrics, to maintain edge of the mills and encourage new investment in the sector.
The BTMA President Mohammad Ali Khokon raised the demands at the 40th consultative committee meeting of the National Board of Revenue (NBR) held Tuesday at the Bangabandhu International Conference Center in Dhaka where businessmen discussed income tax, VAT and duty related proposals for the next fiscal’s (2019-20) budget.
At the meeting, The BTMA President also highlighted the problems and prospects of the textiles sector and submitted a set of proposals hoping to be incorporated in the upcoming budget.
According to him, the size of the local textile market is about $11 billion and mills under the BTMA and they are meeting 30 per cent of yarns for export-oriented knitwear factories and fulfilling 80 percent requirements of yarns for woven factories.
In the fiscal year 2017-18, Bangladesh earned US$31 billion from exports of ready-made garments. Of the earnings, contribution of the textile mills under the BTMA was around US$ 17 billion.
“Import of fabrics and clothes are not necessary if we consider the capacity of the country’s primary textile sector,” he added.
He said, currently VAT is imposed on yarn and finished fabrics but no VAT is charged on fabrics at the production end.
“We have to compete with several global players that have been running their industries with their own raw materials and machineries. Contrarily, we are largely depending on imported raw materials and machineries to run our mills. Despite the fact, the textile sector can meet major portion of demands of yarn and fabrics for local market,” he added.
Considering the fact, he urged the government to keep yarn, fabric and fabric processing out of the VAT net.
Mohammad Ali Khokon sought also an increase in cash incentive to 15 per cent from the existing 4.0 per cent to help sustain production of textile mills and apparel industries.
“Production of textile units has turned unsustainable following rise in wages and prices of basic raw masteries. A 4.0 percent incentive is not enough to cover the additional cost and keep the industry competitive. So, we have urged the government to provide a 15 per cent ‘direct subsidy’ to the sector from the next budget,” he added.
The BTMA boss also urged the government to fix income tax at 12.50 per cent for textile units to continue until 2028.
The BTMA leader also stressed the need for rolling the single borrower exposure limit for textile entrepreneurs and cut the bank borrowing rates to single digit.
“Textile industry is highly capital intensive. To set up a textile mill, an entrepreneur requires huge venture capital. But he/she fails to borrow the necessary capital from banks due to the stringent rules of single borrower exposure limit. A relaxed policy in this regard can help attract more investment in this potential sector,” said the BTMA chief.
Citing the high interest rates on loans as a key barrier to the growth of private investment, the BTMA President recommended to bring down it to single digit (7.0 per cent) to revive the investment cycle.
