In a significant move to bolster Bangladesh’s textile and garment industry, the government has eliminated the source tax on imports of key raw materials, including cotton, synthetic staple fibre, acrylic, and artificial staple fibre.
The decision, announced in a notification signed by AKM Badiul Alam, Member (Tax Policy) of the National Board of Revenue (NBR), on Thursday, July 17, takes effect immediately and fulfils a long-standing demand from the Bangladesh Textile Mills Association (BTMA).
The notification, issued under Section 343 of the Income Tax Act, 2023, sets the source tax rate at 0% for goods imported under the Tax at Source Rules, 2024.
This exemption covers HS codes 5201 to 5507, encompassing raw cotton and synthetic fibres critical to the spinning process.
Earlier this year, the NBR had imposed a 2% advance income tax (AIT) on cotton imports, a move heavily criticized by industry stakeholders for increasing business costs and undermining the competitiveness of the export-oriented garment sector.
The BTMA, representing 1,858 spinning, weaving, dyeing, printing, and finishing mills with investments totalling $23 billion, has long argued that the AIT creates a mismatch between input tax and actual income, straining the liquidity of textile mills that supply 70% of the yarn and fabric for Bangladesh’s top export-earning ready-made garment industry.
The tax withdrawal is expected to ease pressure on working capital, enhance liquidity, and strengthen the sector’s global competitiveness.
Qutubuddin Ahmed, founder of Envoy Textiles Limited, hailed the decision as “timely and necessary,” saying, “This move will help keep the industry more competitive, allowing us to focus on growth and innovation.”
Snehashish Barua, Director of SMAC Advisory Services Limited, described the tax exemption as a “strategic decision” with far-reaching economic benefits. “This isn’t just a tax policy change; it’s a step toward building a strong, competitive, and sustainable textile industry,” Barua told Jago News.
Industry stakeholders emphasised that the AIT had inflated production costs, making it harder for local mills to compete with international counterparts.
The tax waiver is seen as a critical relief measure, enabling mills to redirect funds toward operational efficiency and expansion.
The decision aligns with the interim government’s broader efforts to support the textile and garment sector, which remains a cornerstone of Bangladesh’s economy.
By removing the source tax, the government aims to reduce financial burdens on spinning and textile mills, encourage commercial production, and enhance the sector’s contribution to export earnings.