Bangladesh proposes 15% textile tax rate through June 2030

Marcus Bennett

Bangladesh’s National Board of Revenue proposed on 5 November to cut the income tax rate for domestic textile mills from 27.5% to 15% through 30 June 2030. The proposal, sent to Finance Minister Amir Khosru Mahmud Chowdhury, would restore a rate the sector last received from 2015 to 2025.

What would the proposed tax rate change?

The NBR prepared a draft statutory regulatory order under Section 76(1) of Bangladesh’s Income Tax Act. A senior finance official said: “The SRO would be issued shortly after receiving approval.” Approval from the finance minister remains the next step. The proposal is not yet an enacted tax rule.

If approved, the 15% rate would remain effective until 30 June 2030. The draft covers:

• Yarn production
• Yarn dyeing
• Finishing
• Coning
• Fabric dyeing
• Printing
• Other related activities

The NBR said it recommended the rate to “protect exports and employment and ensure sustainable growth of the textile industry.”

The draft reaches upstream suppliers that produce and process fabric and yarn used by Bangladesh’s export-oriented ready-made garment manufacturers across the domestic production chain.

For mills, the proposed cut lowers headline income tax by 12.5 percentage points. Brand and sourcing teams should treat that figure as a proposal rather than a confirmed cost reduction until the SRO is issued and takes effect.

How does the proposal compare with previous rates?

Textile mills received a 15% rate under an SRO introduced in 2015 for a 10-year period. The order expired in 2025, and the tax rate returned to 27.5%.

If approved, the NBR recommendation would restore the former 15% rate for a defined period, while leaving BTMA’s 10% request outside the current fiscal-year budget process.

In May, the Bangladesh Textile Mills Association proposed a 10% rate through 2030. BTMA cited the 12% rate available to the interconnected ready-made garment sector, arguing that the disparity weakened domestic mills. The NBR did not consider that proposal while preparing the current fiscal year’s budget.

The recommendation sits 5 percentage points above BTMA’s request and 3 points above the RMG rate. The proposal as reported provides no fiscal-cost estimate, calendar effective date or mill-by-mill eligibility criteria. Buyers therefore cannot assume the 15% rate will flow into fabric quotations or contract prices. Final approval and mill pricing decisions will determine whether any savings reach customers.

Why are mills seeking tax relief?

The NBR identified several operating pressures facing domestic textile producers:

• Rising gas and electricity prices
• Inadequate and irregular energy supplies
• High interest rates
• Reduced export incentives
• Competitive pressure following Bangladesh’s graduation from the least developed country category
• Subsidized yarn and fabric imports from neighboring countries

The authority reported that most mills operate at only 60-70% of production capacity. It said irregular gas and electricity supplies have squeezed working capital and pushed businesses toward financial losses.

For brands and garment manufacturers, the relevant issue is supplier operating continuity rather than tax arithmetic alone, particularly where irregular utilities already constrain output and working capital. The proposed 15% rate addresses one financial burden without resolving the infrastructure constraints limiting production.

The proposal predicts lower taxes will ease pressure on mills, support industrial employment and strengthen Bangladesh’s textile competitiveness in the global market. Those remain projected benefits, not measured results.

What changed on bonded yarn imports?

The commerce ministry recently required bank guarantees for imports of 10-30-count yarn under bonded warehouse facilities. It later suspended the order following objections from RMG manufacturers.

The suspension removed the immediate bank-guarantee requirement for bonded imports of 10-30-count yarn, a policy change distinct from the proposed income-tax adjustment for mills. The tax proposal cannot be paired with an active import-control restriction on the specified yarn shipments. Neighboring-country competition cited by the NBR therefore remains relevant to domestic yarn suppliers.

What should buyers watch?

The SRO’s approval, publication and effective date will determine when mills can claim the proposed 12.5-percentage-point income-tax reduction. The finance official provided no calendar date beyond “shortly after receiving approval.”

Buyers should also track whether power and gas availability lifts production above the NBR’s reported 60-70% capacity range. A lower tax rate cannot by itself restore unused capacity or replace depleted working capital.

Until the SRO is issued and operating conditions improve, the 15% rate remains a policy proposal rather than a dependable input for buyers negotiating fabric prices, order allocations and supplier risk.