The National Board of Revenue has halved the source tax on cash incentive for export earnings following exporters’ demand.
Income tax wing of the revenue board on January 9 issued a statutory regulatory order slashing the tax at source on export cash subsidy to 5 per cent from 10 per cent with immediate effect.
The reduced tax rate will remain effective till June 30, 2020, according to the SRO.
The revenue board in the budget for the current fiscal year 2019-2020 had increased the tax rate to 10 per cent from the previous year’s 3 per cent.
Since then, exporters from all sectors had been demanding withdrawal of the tax or a reduction in the rate, saying that the tax would make the country’s export less competitive in the global market.
They had also argued that source tax should not be subjected to tax as the government gave the money as grant to encourage exports.
The country’s exports, including that of the readymade garment items, have been experiencing a slowdown in recent months due to a decline in export competitiveness and a slowdown in the global economy.
The Bangladesh Garment Manufacturers and Exporters Association and other trade bodies had placed the demand on several occasions before the government high-ups as well as the revenue board.
The trade bodies had also sought retrospective effect of the reduced tax rate from July 1.
Officials of the revenue board said that the NBR cut the tax following a recommendation made by an inter-ministerial meeting presided over by commerce minister Tipu Munshi and an approval from the government high-ups.
The NBR did not consider giving the benefit of reduced tax rate with retrospective effect from July 1 as it would significantly reduce the overall tax collection from the sector due to an adjustment of tax deducted in the previous six months, they said. The government provides cash subsidy at various rates for exports, manly in new markets, and for non-traditional export items, to promote export, diversify export products and make the country’s export competitive in the global market.
The government in the budget for FY20 also introduced cash incentive at the rate of 1 per cent for all RMG exporters irrespective of export products and destinations.
In FY19, exporters had enjoyed cash incentives ranging from 2 per cent to 20 per cent for their export proceeds against exports of 35 products.
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