BM Desk : According to industry insiders, textile mill owners are reluctant to release their imported cotton from ports, which raises concerns about possible container congestion and might further disrupt operations at important ports like Beanpole and Chattogram.
Additionally, they stated that a 2.0 percent advance income tax (AIT) levied by the government on the import of raw cotton would have a substantial effect on their capital.
None of the large mill owners are prepared to relinquish their necessary raw materials in response to this circumstance.
To address the effects of the newly implemented AIT, Finance Adviser Dr. Salehuddin Ahmed convened a meeting with textile mill operators and leaders from the apparel sector at his office on Monday afternoon.
National Board of Revenue (NBR) Chairman Md Abdur Rahman Khan attended the meeting alongside Income Tax Policy Member AKM Badiul Alam.
During the discussion, the finance adviser urged the NBR chairman to seek a resolution that takes into account the AIT’s effects on the industry, as the government intends to make an announcement promptly, according to sources.
Md Nurul Islam, the founder of Bangladesh’s largest textile mill under Noman Group, informed The Financial Express that they are not releasing any cotton from the port.He mentioned that they import significant amounts of cotton each month.
Noman Group’s yearly exports exceed $1.0 billion.
Envoy Textiles Founder Chairman Kutubuddin Ahmed expressed his concerns to The Financial Express regarding the new AIT.He stated that he is unable to release his cotton shipments due to the AIT and is awaiting a government action that would provide relief.
Additionally, he noted that his business expenses would escalate if the AIT remains in effect. Md Badsha Mia, managing director of Badsha Textiles, told The Financial Express, “We have no option to release cotton from the port while incurring such high taxes, which will not be reconciled with the income tax at the end of the year.” Sharing similar worries, Saleudh Zaman Khan (Jitu), managing director of NZ Tex Group, mentioned that the cotton he imported is also being held at the Chattogram port, but he cannot release it.
“If the government permits us to release the raw materials under an undertaking, it would greatly benefit the industry. Otherwise, many of us will face port demurrage fees once the seven-day free period expires.
Engineer Razeeb Haider, the director of the Bangladesh Textile Mills Association (BTMA), cautioned that a delay in government decision-making could result in potential container congestion, further disrupting port operations following a three-day backlog caused by the recent “complete shutdown” initiative implemented by NBR officials nationwide.
A senior official from Square Denims mentioned that their commercial team is encountering difficulties in releasing cotton shipments due to a 2 per cent AIT and a 1 per cent customs duty (CD) encountered during the bill of entry submission. Consequently, they are proceeding slowly with the release.
During the meeting, Saleudh stated, “We are required to pay the advance tax using loans. If the government does not eliminate the tax, none of us will be able to conduct business.”Showkat Aziz Russell, president of the BTMA, asserted that Indian spinners are attempting to flood the Bangladeshi market with their yarn by leveraging various incentives offered by their government to boost competitiveness.
Conversely, local spinners are facing mounting pressure due to escalating gas and electricity costs, increased interest rates, and the government’s recent decision to raise the corporate tax from 15 per cent to 27.5 per cent, he elaborated.
Moreover, the newly imposed 2 per cent AIT on cotton imports is adding further strain to the sector, Russell noted. He pointed out that while the government has provided an option to adjust the AIT, it entails a complex bureaucratic process.
Despite this, the sector is burdened with a combined tax load of approximately 67 per cent due to source tax deductions – a burden it cannot sustain, according to the BTMA president. “Given the circumstances, we have noticed that recent policy changes appear to favor Indian millers over local manufacturers,” he remarked. “We possess our own spinning and denim mills. However, our textile unit’s general manager is reluctant to source yarn from our own spinning mill as it would raise the overall production cost,” he added.
Russell urged the finance adviser to take action by eliminating the AIT and lowering the corporate tax rate to 12 percent, aligning it with the readymade garment sector, which will benefit from this rate until 2028. Square Textiles Managing Director Tapan Chowdhury expressed during the meeting that India has significantly incentivized its domestic backward linkage industry, posing a potential threat to Bangladesh’s readymade garment (RMG) sector. “Apparel is a labour-intensive industry. Given India’s vast land resources, it can easily set up factories, generate employment, and potentially overshadow Bangladesh’s leading role in the RMG market,” he stated.
Nevertheless, he is less concerned about the pharmaceutical sector due to its technical nature. The NBR chairman remarked at the meeting that the tax framework was founded on a misconception.
“We believed that traders were importing cotton and selling it to millers for profit,” he explained. “Our assumption was that if someone imports cotton and earns a profit, they should be liable for taxes. Based on this, we projected that Tk 8,900 million would be generated from this item,” he concluded.
