The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has broadly welcomed the proposed National Budget for the fiscal year 2026-2027, titled “The Journey Towards a Democratic, Humane and Inclusive Economy,” presented by the Hon’ble Finance Minister.

BGMEA expressed its sincere gratitude and appreciation to the Hon’ble Finance Minister for the visionary efforts to keep the country’s macroeconomic stability intact, ensure business facilitation, and establish long-term policy stability for investors amid multiple global and domestic economic challenges.

BGMEA believes that the proposed budget for FY 2026-27 is people-oriented and business-friendly. It has shifted focus from a growth-centric approach towards holistic development with the aim of transforming Bangladesh into a trillion-dollar economy by 2034. The emphasis given to sectors such as education, healthcare and social protection is one of the distinctive features of the budget.

The budget has set a growth target of 6.5% for the upcoming fiscal year. Alongside this, ten critical priorities have been identified, including investment-driven employment generation, a production-oriented economy, deregulation, financial sector stability and energy security. BGMEA considers these measures highly important and supportive for the country’s industrial development, trade expansion and particularly for the smooth graduation from the LDC category.

Positive and Reform-Oriented Features of the Proposed Budget:

According to BGMEA, several positive initiatives have been undertaken in this budget regarding industrial capacity enhancement, digitalization and institutional reforms:

Policy Stability and Continuity in the Tax Structure:

The plan to maintain consistency in the tax structure for at least five years to facilitate long-term investment decisions, along with reducing dependence on SROs and introducing a “Risk-Based Audit” system, will significantly enhance confidence among investors and support industrialization.

Reduction of Income Tax Deduction on Cash Incentives:

The rate of income tax deduction against cash incentives has been reduced from the existing 10% to 5%.

Digitalization of Revenue Management and Automated Refund System:

The introduction of an “Automated and Faceless” refund system for excess withholding tax payments and the proposal to treat withholding tax as advance tax instead of minimum tax will provide significant relief to taxpayers.

Simplification of Business Start-up Procedures:

Making online-based “Single Window” services mandatory for approvals and licensing, issuing licenses within seven days, and completing company registration within 48 hours will substantially reduce the time and cost of doing business. Furthermore, measures to attract foreign investment, increase investor confidence, facilitate repatriation of funds, and provide work permits to foreign experts within seven days are highly positive initiatives.

Announcement for Renewable Energy and Green Industry:

The proposal to encourage solar power generation through a 0% tax rate until 2035, a 5% tax rebate for solar electricity users, and complete exemption of duties and taxes on solar sector equipment imports until 2031 will be a milestone towards environmentally sustainable industrialization.

BGMEA also welcomes the decision to reduce the tax rate on recycled products from 3% to 1% and continue duty exemption on ETP chemicals imports.

Modernization of Bond and VAT Systems:

The complete withdrawal of the 10% supplementary duty on synthetic woven fabric imports to prevent misuse of bond facilities, allowing supplies from non-bonded direct exporters to become indirect exporters, and introducing quarterly VAT returns instead of monthly submissions will create a more business-friendly environment.

Incentives for Environment-Friendly Battery Manufacturing Industry:

To encourage production of environment-friendly lithium-ion batteries, sodium-ion batteries and lithium-ion battery packs in Bangladesh, the proposal includes duty and tax exemptions on required raw material imports until June 30, 2030.

Withdrawal of Supplementary Duty on Synthetic Woven Fabric Imports:

To prevent misuse of bond facilities, the supplementary duty on synthetic woven fabric imports has been fully withdrawn and reduced to 0%.

Ensuring a Level Playing Field:

The budget has announced measures to ensure equal opportunities and a fair competitive environment for all investors to protect local industries and prevent unfair competition.

Banking Sector Reform and Easier Financing:

Efforts have been taken to control non-performing loans and ensure good governance in the banking sector, which will help bring interest rates to a reasonable level for genuine businesses and entrepreneurs.

Development of SMEs and Women Entrepreneurs:

The initiative to make turnover up to Tk. 50 lakh for SMEs and Tk. 70 lakh for women and persons with disabilities entrepreneurs tax-exempt is a highly commendable and people-oriented measure.

Additionally, several important policy measures have been proposed to diversify industries and exports in key sectors including pharmaceuticals, information technology and electronics.

BGMEA’s Expectations:

BGMEA believes that the above-mentioned reform-oriented announcements will be supportive for industries. However, considering the current challenges faced by the apparel sector, the organization believes that certain policy support measures are essential to protect the competitiveness of the RMG industry, which remains one of the major sources of employment and foreign exchange earnings.

It is worth mentioning that due to the global economic slowdown and rising domestic costs, apparel export earnings have declined by 3.41%, average unit prices have decreased by 1.55%, and opening of back-to-back LCs for raw material imports has declined by 7.93% in the current fiscal year. As a result, around 400 factories have closed over the past three years.

In this situation, BGMEA strongly expects the following recommendations to be incorporated in the budget to overcome the crisis in the apparel sector:

1. Reduction of Withholding Tax:

The new budget has retained the previous withholding tax rate of 1%. However, considering the current challenges, BGMEA demands that the tax on apparel exports be reduced from 1.00% to 0.65% and maintained for the next five years in line with the government’s declared long-term policy framework.

2. Reduction of Income Tax on Cash Incentives:

BGMEA appreciates the government’s decision to reduce income tax deduction on cash incentives from 10% to 5%. However, considering the current liquidity crisis, BGMEA requests reconsideration for complete exemption (0%).

3. Removal of Double Taxation in Sub-contracting Process:

To keep small and medium factories operational, the 1% double withholding tax on sub-contracting value should be eliminated and the VAT exemption mechanism should be simplified further.

4. Ensuring Reasonable Corporate Tax:

The specialized corporate tax rate applicable to the apparel sector (12% and 10% for green factories) should not be increased through assessment at higher general rates on the basis of other income sources.

5. Reduction of Import Duties on Man-made Fiber Based Apparel Inputs:

Considering the export potential of man-made fiber-based apparel, the proposed 5% import duty on Polyester Staple Fibre (PSF), and additional 5% import duty on PVC Resin and PET Resin should be withdrawn.

BGMEA believes that the apparel sector is not only the country’s leading foreign exchange earning sector but also a major driver of employment generation for millions of people.

To remain competitive in the international market after LDC graduation, it is essential to reduce business costs, ensure uninterrupted and affordable gas and electricity supply, and further simplify customs and port-related procedures.

BGMEA hopes that, in line with the investment-friendly policy stability announced in the budget, the Hon’ble Prime Minister and the Hon’ble Finance Minister will kindly consider the logical demands of BGMEA in the final budget.