Bangladesh Bank makes easy incentive calculation method for apparel sector

Recently, Bangladesh’s central bank, Bangladesh Bank clarified the method of calculating cash incentives for the readymade garment (RMG) sector, addressing the complexity faced by commercial banks in the previous circular.

According to the new circular, exporters in the RMG sector will be eligible for incentives based on a minimum of 20 per cent value addition from their export earnings even as the incentives will be calculated on a cut, make, and trim (CMT) basis, which means exporters can claim the incentive after deducting shipping costs (if borne by exporters), commission paid in foreign currency, and insurance premiums.

To determine the cash incentive value, commercial banks will consider the value of locally sourced raw materials acquired through back-to-back letters of credit (LCs) for export, in addition to the CMT values even as this total will then be divided by the net Freight on Board (FoB) price of the export and multiplied by 100.

The earlier circular issued on 9th May, 2022, had announced that exporters could claim cash incentives if they achieved at least a 20 per cent value addition. This marked a significant change from the previous requirement of 30 per cent value addition.

Courtesy: Apparel Resources