Bangladesh’s National Board of Revenue (NBR) has imposed a 2.0% advance income tax (AIT) on over 150 imported items, including essentials and industrial inputs, sparking concern among manufacturers and economists over potential cost hikes and supply chain disruptions.

Outlined in the Tax Deduction at Source Rules 2025, the measure applies to imports under nearly 200 Harmonized System (HS) codes. Items affected include cotton, wheat, rice, soybeans, LPG, jet fuel, diesel, sugar, and raw materials crucial for the garment and textile industries.

Business leaders argue the tax—introduced via a June gazette signed by NBR Member AKM Badiul Alam—will raise production costs. “This is a ridiculous decision made without consulting stakeholders,” said Showkat Aziz Russell, President of the Bangladesh Textile Mills Association (BTMA). “It will hurt manufacturers at a time when global competition is intensifying.”

Cotton importers, in particular, warn the AIT undermines the sector’s competitiveness. “Even with zero duty, this additional 2% creates a financial burden,” said Saleudh Zaman Khan Jitu of ANZ Group.

Economists echoed these concerns. Dr Masrur Reaz of Policy Exchange Bangladesh called the tax on raw cotton “illogical” and misaligned with global practices. CPD’s Mustafizur Rahman cautioned that unless properly adjusted, the AIT could function as a de facto sales tax, inflating costs further.

NBR officials defended the measure as revenue-positive, saying it is adjustable against annual income tax liabilities. However, businesses argue that adjustments are complex and rarely feasible.