In a recent proposal to the National Board of Revenue (NBR), the Dhaka Chamber of Commerce & Industry (DCCI) has urged the government to implement a uniform single-digit VAT rate across all sectors, including the pivotal ready-made garment (RMG) industry. Currently, Bangladesh operates under a standard VAT rate of 15 per cent, with various sectors subjected to different slabs of 10 per cent, 7.5 per cent, and 5 per cent. This segmented approach has reportedly caused confusion and disputes among traders, particularly impacting those in the RMG sector who struggle with tax compliance and input tax rebate benefits.
DCCI President Taskeen Ahmed presented the proposal during a meeting with NBR Chairman Abdur Rahman Khan, emphasizing that a simplified tax structure would enhance transparency in revenue management and significantly reduce the cost of doing business. The RMG sector stands to benefit immensely from such reforms. By streamlining VAT processes, manufacturers can mitigate the financial burdens imposed by the current system, allowing them to allocate resources more effectively toward production and export growth.
The DCCI’s comprehensive budget proposals for FY2025-26 included a call for a nominal 1 per cent VAT for informal sector traders, aimed at fostering inclusivity and encouraging compliance. The RMG industry, which often operates in a landscape of complex regulations and varying tax obligations, could see a reduction in operational costs, thereby enhancing its competitive edge in global markets.
Moreover, Taskeen Ahmed highlighted the need to adjust the tax-free income limit for individuals from Taka 3.50 lakh to Taka 5 lakh, a move that could alleviate financial pressure on workers in the garment sector who are already grappling with inflation. This adjustment would not only benefit wage earners but could also lead to increased consumer spending, further stimulating demand for RMG products.
The DCCI also proposed a gradual reduction of advance tax for commercial importers and manufacturers, addressing concerns that traders often pay customs duties that exceed actual import costs due to discrepancies between government-set tariff values and market prices. This reform is particularly vital for the RMG sector, where raw materials play a crucial role in production costs.
During the discussions, NBR Chairman Abdur Rahman Khan acknowledged the challenges posed by the current tax system and expressed the NBR’s commitment to reforming revenue policies to facilitate trade and investment. He indicated that if the business community, including RMG stakeholders, could reach a consensus on VAT rates, the government would consider transitioning to a single-digit VAT system.
The DCCI’s proposals reflect a broader call for simplification and modernisation of Bangladesh’s tax framework, which could significantly impact the RMG sector’s sustainability and growth. As the industry continues to navigate a complex global landscape, these reforms could position it for enhanced competitiveness and resilience in the years to come.
