The government is considering lowering customs duties on seven imported chemicals used by tanneries in the upcoming national budget, aiming to give a bit of relief to the struggling leather sector.
Currently, only 27 tanneries benefit from bond facilities designed to support local producers. Meanwhile, around 100 others face higher taxes on imported chemicals, making it harder for them to compete, according to finance ministry sources.
Industry experts say this system creates unfair competition. The Bangladesh Tanners Association (BTA) has already raised concerns with the National Board of Revenue (NBR), saying the existing taxes are harming the sector’s ability to stay competitive.
Some traders reportedly abuse the bond system by importing chemicals duty-free and then selling them in the open market, profiting from the higher duties faced by non-bonded tanners.
In response, the government is considering reducing duties on seven key tanning chemicals, including chromium sulphate, acid dyes, and wattle extract.
Under the proposal, duties on six chemicals may drop from 5% to 1%, while the duty on sulphate might be reduced from 10% to 5%. However, a 15% VAT could be added to sulphate.
“The current import tax structure, ranging from 35 to nearly 40% on essential chemicals, is simply unsustainable, Chemical imports are the lifeline of the tannery sector. Except for basic inputs like salt and lime, we rely entirely on imported chemicals. Competing with countries that enjoy cheaper raw materials becomes nearly impossible under these tax conditions.”
Shaheen Ahmed, Chairman, Bangladesh Tanners Association
Tanners argue these proposed changes are not enough. The BTA submitted a proposal in March urging a steep reduction in total tax incidence, which currently can be as high as 58.6% when advance taxes are included. The association wants this rate cut down to 7.5%.
