BM Desk : The 2 percent advance income tax (AIT) on cotton imports has been called for to be removed by the BTMA, an association of owners of textile mills. They claimed that while the government may find it easy to raise money by imposing an advance income tax, the move is suicidal. The textile industry will face a serious crisis as a result. Due to the reduction in working capital, many textile mills would eventually close.
Shawkat Aziz Russell, the president of the BTMA, wrote to Abdur Rahman Khan, the chairman of the National Board of Revenue (NBR), mentioning this. Ahsan H. Mansur, the governor of Bangladesh Bank, and Salehuddin Ahmed, the financial advisor, both received the letter on Thursday.

In addition to the removal of the 2 percent advance income tax, BTMA has proposed an exemption of Tk 5 per kg on specific taxes for cotton yarn and yarn produced from a blend of synthetic and other fibers in local textile mills.

According to BTMA, the organization comprises 1,858 spinning, weaving, and dyeing-printing-finishing textile mills. The investment in this sector is approximately $23 billion. The textile industry supplies 70 percent of the yarn and fabric for the country’s leading export sector, the ready-made garment industry. Consequently, any issues within the textile sector will adversely affect the garment industry as well.

The BTMA president stated in the letter that the implementation of a 2 percent advance income tax on cotton imports will significantly raise the production costs for textile mills, hindering our competitiveness against other countries. As a result, domestic textile mills may struggle to survive in the future under any circumstances. If AIT is levied at a rate of 2 percent each time imported cotton is unloaded, the tax burden could escalate to 29 percent by year-end. This will continuously deplete working capital, creating an unbearable situation for industries reliant on imports, such as the textile sector. If AIT is applied at this compounded rate, working capital could diminish to zero within three years. Consequently, domestic textile mills will suffer, leading to an increase in yarn imports from competing nations. This will diminish the value added to product exports. Therefore, it is essential to eliminate the 2 percent AIT.

The BTMA president’s argument in favor of the demand for withdrawal of specific tax on yarn produced in domestic factories is that the specific tax per kg on various types of yarn has been The production cost has risen from Tk 3 to Tk 5. This change will significantly affect the domestic spinning industry. The increase in yarn prices will likely deter buyer institutions from purchasing local yarn. Consequently, many textile mills may shut down.

Shawkat Aziz further asserted that this government decision jeopardizes the $75 billion investment in the ready-made garment and textile industry. This situation could adversely affect the national economy. It may lead to uncertainty regarding the payment of salaries and allowances for a substantial number of workers and employees, which is quite unfortunate.

The BTMA reported that the current severe energy crisis, along with rising wages and various global challenges, has caused production costs in the textile sector to rise by 15-20 percent. Additionally, the energy crisis has nearly halved production capacity. This has placed domestic textile mills, particularly yarn mills, in a state of crisis.