Over 150 imports, including essentials and capital goods for industries, are set to be costlier with a 2.0-percent advance income tax levied, businesses said.

The National Board of Revenue (NBR) has imposed the AIT on the import of 150 items under nearly 200 HS (Harmonized System) codes, as per the tax-deduction-at-source rules 2025.

The array of items includes machinery, spares and raw materials for various industries, like the ready-made garment (RMG) and textiles.

Economists and business leaders say this fresh fiscal measure is likely to increase the cost of imports for manufacturers and potentially impact supply chains.

In June 2025, a gazette notification on the AIT was issued by the NBR and signed by NBR member AKM Badiul Alam.

According to the notification, the major items on the list are cotton, wheat, flours, maize, rice, soybeans, sunflower seeds, mustard seeds, linseed, sugar, bulbs, tubers, jet fuels, kerosene, diesel, furnace oil, LPG, natural gas, petroleum bitumen, iron oxides and zinc sulphate. Cotton has been included in the updated list lately. The earlier list was publised in May last.

Business leaders and economists fear imposing advance income tax could drive up the prices of everyday necessities. However, NBR officials argue that because the tax is adjustable, retail prices will remain unaffected.

An NBR official explained that a 2.0pc AIT is being introduced on more than 150 products against the previous rate of zero.

"Even after the AIT is imposed, consumer prices will not rise," the official hopes. "The tax collected in advance will be adjusted later, which will help broaden the revenue base."

He cites different rates of AIT: 5.0-percent, 3.0-percent, 2.0-percent, 1.0-percent and zero-rated tax.

He says if anyone is unable to adjust the tax, it will be treated as a minimum tax for the importers. Generally, importers bring in goods for business purposes and generate income, which is subject to adjustment at the end of the fiscal year.

Talking to The Financial Express, Bangladesh Textile Mills Association (BTMA) President Showkat Aziz Russell said it is a "ridicules decision" the NBR has taken without consulting any stockholders.

This decision apparently is designed to boost revenue, which, however, will impact negatively the business activities, he said.

He notes that when the government has given duty exemption on raw materials, the 2.0-percent AIT on raw material imports will further increase input costs for manufacturers.

"The NBR always claims businesses will be able to adjust their advance tax at the end of the year; however, it is a very difficult task and a lengthy process," says the leading businessman.

The BTMA president also alleges that a group of government officials has taken this step to favour a neighbouring country, aiming to boost its local value addition and exports.

He says BTMA will write to the Finance Minister for removal of this AIT, and will meet with the NBR Chairman for taking immediate action to relieve raw material importers of this tax burden.

Saleudh Zaman Khan Jitu, managing director of ANZ Group, says, "We are importing cotton with zero duty and that time additional 2.0-percent AIT will make a burden on millers."

He mentions that they are paying 1.0-percent source tax on sales which has no option to get adjusted at the end of fiscal.

Citing a further example he says, "We are paying Tk1.5 million as source tax but at the end of the fiscal our net payable is lowered to an amount lower than the paid amount. Despite that, this AIT will make burden on millers."

The entrepreneur alerts if the government does not revise this tax, it will increase their yarn cost, at a time when they are in a hard competition with imported yarn.

"As a result, RMG makers will move to Indian yarn as that will be much cheaper than local one," he says about the anticipated fallout on the industry.

Talking to the FE Prof Mustafizur Rahman, Executive Director of the Centre for Policy Dialogue (CPD), said the government must create a scope for adjusting advance tax, or else, it will be treated as sales tax.

And "businesses must maintain accuracy in their accounts, which will help them adjust the tax at the time of final settlement. Otherwise, it will increase their overall production costs".

Dr Masrur Reaz, Chairman of Policy Exchange Bangladesh, terms the AIT on cotton imports illogical, as cotton is the main raw material for the backward-linkage industry.

He notes that the RMG sector requires further investment to remain competitive on the global market. "Imposing tax at the import stage impacts capital before any profit is made. Tax on import value is not compliant with global practices."

He further states that the government should revise the policy, otherwise textile millers will have to count increased production costs.

"During times of high inflation, imposing AIT on essential commodities is a poor decision," he says, adding that "it will contradict the Finance Minister's budget speech".