“Overall production cost of the garment sector has increased by 40%”- BGMEA President wrote to Finance Ministry

The overall production cost of the garment sector has increased by 40 percent in the last five years due to various reasons including procurement of industrial raw materials, container rent, increase in diesel prices. Recently, due to increase in gas prices and electricity shortages, this cost is feared to increase further. On the other hand, due to the price inflation caused by the Russia-Ukraine war, the demand for manufactured garments in the European and American markets has decreased. It has reduced the purchase order compared to before. It is in such a situation that the tax at source in the garment industry sector has doubled in the current fiscal compared to the previous fiscal, which has put additional pressure on the sector. Therefore, the garment sector traders want long-term policy support including tax at a source of 5 percent.

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hasan recently wrote a letter to the Finance Department of the Ministry of Finance asking for this assistance. This information is known from the relevant sources.

In the letter, it is said that the budget of 6 lakh 78 thousand 64 crores under the title of ‘change in the continuity of development beyond the impact of covid’ will help to maintain the development by facing the existing challenges. Moreover, keeping separate allocations for special sectors including agriculture, education, health, human resource development, employment creation, physical infrastructure development, communication infrastructure development, and digital Bangladesh reflects the government’s intention to create a developed Bangladesh.

The letter said that this year’s budget has retained the reduced corporate tax rate as in the previous year to encourage the garment industry, along with many amendments to the VAT law and tax law to facilitate business, which is expected to help boost exports. However, the budget has increased the tax rate at source from 5.5 percent to 1 percent. However, the entrepreneurs of the clothing sector demand that this tax should be 5.5 percent as before. Businesses say that sudden changes in key tax rates hamper mid- to long-term planning in business.

The sector stakeholders feel that the increase in tax at source will create a very difficult situation for the garment industry in the current global context. BGMEA says that the increase in tax rate is not right at a time when the garment industry is turning around to face the challenges caused by the pandemic. In the current scenario, increase in tax at source will make the garment industry’s struggle for survival more difficult.

The letter also said that as a result of the Russia-Ukraine war, the prices of food and daily commodities including fuel oil are increasing on the one hand, and economic recession has occurred in several countries of the world including Europe. Inflation has been rampant in Europe and America. Countries are raising interest rates to control the situation. As a result, the demand for Bangladeshi products in the international market is decreasing, and there is a fear of further decrease in the future.