The Bangladesh government has reduced tax at source for the apparel and textile sector to 0.30 per cent from the existing 0.80 per cent. The directive came following the apparel makers demand to reduce the tax at source to 0.25 per cent from the existing one to help the sector recoup losses caused by the prevailing political unrest. The exporters will enjoy the benefit from January 01 last till June 2015.

The finance ministry in a letter issued on January 07 directed the National Board of Revenue to take necessary action in this regard. However, the letter also mentioned that Prime Minister's approval is required to implement the reduction of tax at source.

Earlier on December 12, leaders of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and Bangladesh Textile Mills Association placed several demands before finance minister AMA Muhith to help them offset the extra cost following the recent hike ways for in garment workers and losses due to political impasse.

The leaders in a meeting held on January 06 also demanded a reduction of 0.40 per cent tax, sources added. Their demands also included bank loans equivalent to four months' wages of workers, starting from November last which would be repaid over a period of two years. They also wanted the banks to put their term loans/project loans/import-related loans in interest-free block accounts for next two years.

Besides, the owners requested the banks not to categorise their default loans as 'classified' within two years, starting from the last quarter and onwards and sought incentive at a rate of 3.0 per cent against each free of board (FoB) export.

The government might offer a 0.25 per cent cash incentive against each FoB export, sources said.

According to BGMEA, if the cash incentive is offered at a rate of 0.25 per cent on FoB, it will provide a financial support worth $2500 to the same factory, it said.

Welcoming the move, BGMEA president Atiqul Islam told the FE that it would help the sector overcome the present situation to some extent. They are hoping the government will consider our other demands and help the sector recover the losses.

They proposed minimum wage at Tk 4500 while the government fixed Tk 5300. The supports will help the sector increase its capacity to reduce the gap of TK 800, BGMEA president said.

The reduction of source tax at a rate of 0.30 per cent will save $5000 for a medium category of factory having 1500 workers.