Apparel makers may have to pay corporate tax and source tax at increased rates from the next fiscal year (FY), 2018-19.
Currently, the apparel makers are enjoying a reduced corporate tax rate of 12 per cent. The rate is 10 per cent for factories having green building certification.
On the other hand, the source tax for the garment industry is 0.7 per cent at present.
The apparel makers are paying taxes at the reduced rate under two separate Statutory Regulatory Orders (SROs) issued by the National Board of Revenue (NBR) at the beginning of the outgoing fiscal.
According to the SROs, the garment sector would enjoy this facility until June 30, 2018.
After the expiry of SROs, the apparel makers and exporters would be required to pay 35 per cent corporate tax and 1.0 per cent source tax from next fiscal year as per the Income Tax Ordinance 1984, officials said.
On Thursday, The finance minister, however, in his budget speech said the RMG industry is playing an important role in generating employment and fostering economic growth of the country.
Taking these into consideration, the sector has been receiving special tax incentives, AMA Muhith said.
"In continuation of that policy, I am proposing to reduce the tax rate for RMG manufacturers and exporters to 15 per cent," he added.
But this rate is higher than the current corporate tax rates being paid by the garment manufacturers.
The minister has also proposed tax at the rate of 12.5 per cent for the garment factories that are public limited companies.
Besides, tax at the rate of 12.0 per cent has been proposed for the garment factories having green building certification.
As the finance minister did not mention anything about the source tax, the RMG sector has to pay it at the previous rate of 1.0 per cent from the next fiscal year, said the officials concerned.
The 100 per cent export-oriented textile industry is now exempted from duty on import of raw materials.
The minister has also proposed this exemption of duty on import of textile raw materials, such as flax fibre and flax tow, from the next fiscal year.
