Government scraps 2% withholding tax on cotton imports after industry demand

The move follows the textile mills association’s repeated calls for tax removal

The interim government has withdrawn the 2 percent tax at source on cotton imports, bowing to persistent demands from the Bangladesh Textile Mills Association.

In a notification issued Thursday, the National Board of Revenue said the withholding tax had been reduced to zero.

The same exemption will apply to yarns produced from synthetic and blended fibres.

The reversal comes amid mounting criticism from the industry, which argued that the tax -- introduced without consultation -- posed a “serious threat” to the viability of domestic textile mills.

At a recent press conference, the association's President Mohammad Showkat Aziz Russell condemned the decision to impose the tax unilaterally.

“The government enforced a 2 percent advance income tax on cotton imports without engaging the industry,” he said. “Cotton imports have never faced any form of duty in the past.”

Showkat warned that mills cannot operate profitably under the weight of the tax.

“Textile manufacturers simply cannot stay afloat if forced to pay a 2 percent advance tax on every cotton shipment,” he said. “Over the course of a year, that compounds to 29 percent.

“It will steadily drain working capital and cripple an industry that substitutes imports.”

Alongside scrapping the source tax, the association is urging the interim administration not to reinstate the 15 percent corporate tax on textile income when the current preferential rate expires in June.