Bangladesh is mulling of earning $60 bn from the export sector by 2021. Last year the export amounted to $36.67 bn and with service sector export volume was $41.07 bn. Apparel makes up more than 80 per cent of Bangladesh’s total exports—with the value of those exports having doubled in the past eight years.
The robust growth is no mystery. Only China exports more garments. If China is the factory of the world, Bangladesh is the tailor of the world. The country’s gross domestic product has been on a year-long winning streak. In the 12 months through June, it grew at a 7.86 per cent clip. Per capita GDP doubles every seven to eight years, with the figure now standing North of $1,700.
Readymade garment exporters are set to receive a huge tax benefit just before the national elections as the government has decided to reduce the rate of source tax on export earnings further by 58 per cent. Finance Minister Abul Maal Abdul Muhith has already conveyed his consent to National Board of Revenue to reduce the source tax to 0.25 per cent from current 0.60 per cent. NBR would complete the procedures, including taking vetting from Law Ministry, to issue the statutory regulatory order reducing the rate to 0.25 per cent.
Meanwhile, Bangladesh’s National Board of Revenue recently exempted four services of the export-oriented readymade garment (RMG) sector from value-added tax (VAT). The services are expenditure for workers welfare and entertainment, laboratory test fee, information technology (IT)-enabled services and rent-a-car facility. VAT ranged from 5-15 per cent for the services.
Excluding the four new services, apparel makers since 2005 have been enjoying 100 per cent VAT exemption for 13 types of services including supply of goods and services, security, transport contractors and port services, and partial exemption up to 80 per cent for another three types of services-electricity, water and natural gas bills. The decision followed demands from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) for VAT exemption for all types of services.
Further, last month govt. announced health insurance scheme for garment workers bringing a big relief to them. Now by paying an annual premium of Tk 100, a worker can became the holder of a healthcare insurance policy. The policy would cover inpatient medical bills amounting to Tk 12,000 and outpatient bills, including medicine of Tk 3,000 for the year.