NBR withdraws 2pc AIT on cotton, fibre imports

The National Board of Revenue (NBR) has finally withdrawn the 2.0 per cent advance income tax (AIT) on the import of cotton and other textile fibres -- a long-standing demand from the country's spinning and textile millers.

According to a gazette notification issued on Thursday (July 17), the exemption applies to raw cotton (carded, uncarded, or combed), synthetic staple fibres, and artificial fibres of various compositions, including polyester, acrylic, and nylon.

The Financial Express had earlier reported that the government recently imposed a 2.0 per cent AIT on cotton imports. Following this, millers raised strong objections and urged the authorities to withdraw the tax.

In response, the government took the initiative to scrap the AIT.

Stakeholders argued that the AIT increased the cost of doing business and disrupted the competitiveness of the export-oriented apparel sector.

Industry insiders welcomed the decision, saying it would ease pressure on working capital and improve liquidity for textile millers and spinners. "This is a timely and much-needed decision," said Kutubuddin Ahmed, founder of Envoy Textiles Ltd.

He also expressed gratitude to the finance adviser, the NBR chairman, and other government officials involved in the process, adding that the exemption will help the industry remain competitive. He noted that the AIT was introduced for the first time earlier this year.

The exemption covers HS codes ranging from 5201 to 5507, including raw cotton and synthetic fibres used in the spinning process. The notification, signed by the First Secretary (Tax Policy) of the NBR, confirmed that the exemption takes immediate effect.

"Withdrawal of advance income tax on raw materials for local spinning mills is not just a tax adjustment; it's a strategic policy measure that can unleash a cascade of positive economic effects, fostering a more robust, competitive, and sustainable textile industry," said Snehasish Barua, director of Smac Advisory Services Ltd.

The Bangladesh Textile Mills Association (BTMA) had long been lobbying for the removal of AIT on fibre imports, citing a mismatch between input tax and actual income-especially for companies in the export supply chain that already enjoy tax exemptions.

The decision aligns with the government's broader goal of supporting backwards linkage industries and maintaining Bangladesh's competitive edge in the global textile and apparel market.

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