Bangladesh: Textile millers delay release of imported cotton over 2pc AIT

Textile mill owners show reluctance to release their imported cotton from ports, raising concerns about potential container congestion, which could further disrupt operations at major ports, including Chatto gram and Beanpole, according to industry insiders. They also said the government has imposed a 2.0 per cent advance income tax (AIT) on the import of raw cotton, which would significantly impact their capital. In light of this, none of the large mill owners is interested in releasing their basic raw materials. To discuss the impacts of the newly-imposed AIT, Finance Adviser Dr Saleh Uddin Ahmed held a meeting with textile millers and apparel sector leaders at his office on Monday afternoon. National Board of Revenue (NBR) Chairman Md Abdur Rahman Khan was present there along with Income Tax Policy Member AKM Badiul Alam. During the meeting, the finance adviser asked the NBR chairman to find a solution considering the AIT's impact on the industry as the government aims to make an announcement as soon as possible, according to sources. Md Nurul Islam, founder of Bangladesh's largest textile mill under Noman Group, told The Financial Express they are not releasing any cotton from the port. He said they import huge quantities of cotton every month. Noman Group's annual export amounts to over $1.0 billion. Envoy Textiles Founder Chairman Kutubuddin Ahmed told The Financial Express he is worried about the new AIT. He said he is unable to release his cotton shipments because of the AIT. He also said he is waiting for a move from the government in this regard that will bring relief. Md Badsha Mia, managing director of Badsha Textiles, told The Financial Express, "We have no scope to release cotton from the port by paying such high taxes, which will not be adjusted with the income tax at the end of the year." Echoing similar concerns, Saleudh Zaman Khan (Jitu), managing director of NZ Tex Group, said cotton imported by him is also stockpiled at the Chattogram port, but he is unable to release it. "If the government allows us to release the raw materials under an undertaking, it will be a big relief for the industry. Otherwise, most of us will have to pay port demurrage charges after the expiration of the seven day free facility." Square Textiles Managing Director Tapan Chowdhury told the meeting India has highly incentivised its domestic backward linkage industry and this could be a threat to Bangladesh's readymade garment (RMG) industry. "Apparel is a labour-intensive industry. As India has huge amounts of land, it can easily establish factories, create jobs, and take over Bangladesh's dominant position in the RMG sector," he said. However, he is not as much worried about the pharmaceutical industry because it is technical. The NBR chairman told the meeting the tax structure was based on a misunderstanding. "We thought traders were importing cotton and selling it to millers for profits," he said. "Our assumption was that if someone imports cotton and makes a profit, he should be able to pay taxes. Based on that, we estimated that T k 8,900 million would be collected from this item," he added.