Exporters, especially ready garment producers, have been lobbying the government to reduce the tax to 0.25 percent
The government reduced the source tax on export of all business including readymade garment sector to 0.25 percent from 1 percent for the current fiscal 2020.
Exporters, especially ready garment producers, have been lobbying the government to reduce the tax to 0.25 percent since the budget was declared in parliament in June this year.
The Income Tax wing of the National Board of Revenue (NBR) on Monday issued the regulatory order signed by its Chairman Md Mosharraf Hossain Bhuiyan. The new source tax would be applicable from October 21.
In the budget for fiscal 2020, the source tax on export proceeds was raised to 1 percent as the reduced tax rate of 0.25-0.6 percent for different sectors, set for fiscal 2019, expired in June this year.
As a result, the first quarter of the current fiscal witnessed an enormous negative impact on exports as the export earnings plunged to $9.65 billion or by 2.94 percent, which was $9.94 billion in the same period last year.
According to Export Promotion Bureau data, during the first quarter of this fiscal year, the apparel export dropped by 1.64 percent, putting a huge impact on the overall export earnings of the country.
The government in January this year cut source tax on garment exports to 0.25 percent for fiscal 2019 following reducing to 0.6 percent from 1 percent in September, 2018.
Source tax on jute exports, however, remained at 0.6 percent for fiscal 2019.
Ready-Made Garment exporters claimed the tax cut was needed to fend off the global competitors in the sector amid a rise of gas prices in the country.
It was a logical demand of all export-related business sectors, said Bangladesh Garments Manufacturing and Export Association president Rubana Haque.
She said, "[The government] should be retrospective. Historically always is."
Officials of the NBR said, though it will have a negative impact on revenue collection, the government had to take the decision.
Revenue Board officials said, source tax collection from $40.5 billion-worth export earning sector would decline, affecting the overall tax receipts, at a time when the revenue board was struggling to meet the revenue collection target.