BTMA urges withdrawal of AIT on cotton imports

Bangladesh's primary textile industry is feared to head towards a serious disruption, the Bangladesh Textile Mills Association (BTMA) has warned, calling for urgent policy reversals to safeguard local spinning mills from collapse and maintain competitiveness in the global market.

The association has urged the government to immediately withdraw the 2.0 per cent Advance Income Tax (AIT) imposed on imported cotton and revise down corporate tax to 15 per cent from 27 per cent to safeguard the country's primary textile sector from a looming crisis.

In separate letters sent to the finance and commerce advisers, the Bangladesh Bank Governor, and the Chairman of the National Board of Revenue (NBR) on Thursday, BTMA President Showkat Aziz Russell said the newly imposed AIT, along with an increased specific tax on yarn, would severely disrupt domestic spinning mills and jeopardise the textile industry's competitiveness.

He said the decision to increase the AIT was made without consulting industry stakeholders and is likely to be "self-defeating" for the sector and the wider economy.

"Although it may appear to aid revenue mobilisation, this AIT will significantly increase production costs and make local mills less competitive compared to regional counterparts. Textile mills, especially in the spinning segment, will not be able to survive under this pressure," the letter reads.

The BTMA warned that paying AIT on every shipment will lead to working capital shrinkage over time, with the cumulative tax burden potentially reaching up to 29 per cent annually.

If this continues, the industry's working capital could deplete entirely within three years, the association cautioned.

Bangladesh does not produce cotton and is entirely dependent on imports, it said, noting that local mills have the capacity to supply 100 per cent of yarn for the knit sub-sector and 55-60 per cent for woven apparels.

The BTMA said that this was accomplished despite challenges like gas and electricity price hikes, the dollar crisis, local currency devaluation, rising interest rates, and declining export incentives.

In addition to the AIT concern, the association also protested the budgetary measure for FY 2025-26, raising the specific tax on domestically produced cotton and blended yarns per kg to Tk 5.0 from Tk 3.0.

It argued that the increased tax will push up yarn prices and discourage garment manufacturers from sourcing locally, leading to mill closures, job losses, and declining value addition in the RMG sector.

"Such policy decisions, made without consultation, put at risk the $75 billion investment in the textile and apparel sector, and undermine the target of reaching $100 billion in export earnings by 2030," the BTMA said.

The association called on the government to support the domestic textile sector as a key partner in export growth, rather than weakening its competitiveness through abrupt fiscal measures.

BTMA also expressed its willingness to participate in policy discussions and urged the authorities to convene a meeting at the earliest possible time to address the issues raised.

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