The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) on Tuesday demanded withdrawal of 15 percent value added tax on rented floor spaces and continuation of 0.25 percent tax at source instead of 1 percent for the export sector in the proposed budget for 2010-11 financial year.

Especially, the small and medium garment factories will face difficulties if the government does not withdraw 15 percent VAT on the rented floor spaces the factories use, said Abdus Salam Murshedy, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

Finance Minister AMA Muhith in his budget speech on June 10 proposed continuation of 15 percent tax on rented floor spaces used by garment factories and hiking of tax at source to 1 percent from 0.25 percent.

The BGMEA president said majority of the small and medium garment factories are set up on rented houses, as the owners of such factories have no so strong financial capability to run the businesses at their own buildings.

At a post-budget press briefing at the BGMEA office, Murshedy said the proposed increase in tax at source will hamper the export growth as the cost of production will go up further.