Bangladesh Textile Mills Association (BTMA) has sought a higher cash incentive for local yarn use, lower taxes and import duty relief, warning that rising yarn imports are weakening domestic spinning mills and threatening the country’s textile supply chain ahead of LDC graduation.
In a letter to Finance Minister Amir Khosru Mahmud Chowdhury on 9 July, BTMA proposed raising the cash incentive for garment exporters using locally produced yarn to 5 per cent from 1.50 per cent, saying the move would help local mills survive, increase value addition and strengthen foreign currency retention.
The association also sought restoration of the 30 per cent value addition requirement for raw material imports against bank guarantees, arguing that its removal has increased the risk of misuse, irregularities and unfair competition.
BTMA requested a 12 per cent corporate tax rate for primary textile companies until June 2030, matching export-oriented apparel manufacturers, as the sector faces a higher effective tax burden despite being a key part of the export supply chain.
It also sought withdrawal of the 5 per cent import duty on Polyester Staple Fibre (PSF), PVC Resin and PET Resin to lower production costs and support man-made fibre-based yarn, fabric and apparel production.
The association proposed removing withholding tax on cash incentives, saying even after the rate was reduced from 10 per cent to 5 per cent, treating the deduction as advance tax increases exporters’ actual tax burden and worsens liquidity pressure.
If retained, the 5 per cent deduction should be considered the final tax liability, it said.
BTMA further sought exemption for export-oriented industries from provisions under the Income Tax Act, 2023 that treat notional 12 per cent interest on inter-company loans as taxable income, arguing such loans are used for working capital, export orders, machinery purchases, liquidity support and investment rather than profit generation.
The policy demands come as yarn imports have risen sharply, from Tk14,410 crore in fiscal year 2022-23 to Tk26,700 crore in FY2024-25, creating pressure on local spinning mills. Imports from India have also increased significantly, BTMA said.
Representing 1,883 mills involved in spinning, weaving, denim, dyeing, printing and finishing, the association said the primary textile sector has about $32 billion in investment, while total investment across the textile and apparel value chain stands at around $80 billion.
BTMA said local mills can supply nearly 100 per cent of yarn demand from knitwear exporters and 60-70 per cent from woven garment exporters, while meeting domestic demand and saving about $8 billion in foreign currency annually.
The association warned that weakening local textile capacity would increase dependence on imported yarn and raw materials, reduce local value addition and foreign currency retention, raise lead times and hurt Bangladesh’s competitiveness after LDC graduation, when Rules of Origin, Product Specific Rules and Double Stage Transformation will become more important for retaining export advantages.
