Light engineering gets 10-year tax holiday

The government is to provide a conditional 10-year tax holiday for companies manufacturing light engineering products in a move to encourage entrepreneurships and develop the industry.

To avail the facility, companies will have to manufacture small parts and products used in factories.

In his budget speech, Finance Minister AHM Mustafa Kamal said the government is pledge-bound to nurture the "Made in Bangladesh" brand to accelerate establishment of mega industries and production of import-substitute industrial goods in the country.

"I propose to provide tax exemption, subject to certain conditions, to the companies engaged in production of certain home and kitchen appliances as well as light engineering products for ten years," he added.

He has also proposed a reduction in the value-added tax (VAT) rate on paper cone manufacturing of the light engineering industry.

The finance minister said the year 2020 was declared as "Light Engineering Products Year" by the prime minister.

"Hence, to make the provisions of exemption easier for production of capital machinery by the light engineering sector so that it may flourish, I propose to make necessary amendments in the rules and reduce VAT on paper cone manufacturing from 15% to 5%," he added.

Md Abdur Razzak, president of the Bangladesh Engineering Industry Owners Association, hopes that the light engineering industry will expand further riding on the tax exemption facility.

He said the National Board of Revenue (NBR) had issued a statutory regulatory order (SRO) in October 2020. Due to that SRO, consent had to be obtained from the Divisional Customs Office, Divisional Commission Office and the NBR head office to manufacture the goods.

"Getting consent from all these agencies was a time consuming issue. In this budget, the NBR has cancelled it through a new SRO. This is a good step for the light engineering industry," said Md Abdur Razzak.

"But in the case of washing machines, another new SRO has been issued. The previous conditions have been re-imposed. This will hurt washing machine manufacturers."

The journey of the light engineering industry began here after the independence of the country.

Initially, manufacturing and maintenance of some parts of various industries and vehicles kicked off in a few factories at Tipu Sultan Road, Banglabazar, Bangshal, Madan Pal Lane in the area around Dholaikhal in the old part of Dhaka.

In 1986, after the industries ministry had allocated a loan of Tk5 crore under the Dholaikhal-Jinjira project through the Bangladesh Small and Cottage Industries Corporation, this sector started developing.

The light engineering industry is operating as a partner of large industries. Local mechanics are making basic instruments or parts of various industries. There are factories of the light engineering industry scattered in different parts of the country.

Md Abdur Razzak said the sector has an investment of $15 billion.

This sector is now manufacturing products worth Tk10,000 crore. One-third of the local market demand of Tk30,000 crore is coming from various small and large companies in the sector. They are making modern instruments and parts of automatic technology from small ordinary nut bolts.

According to the Bangladesh Engineering Industry Owners Association, there are over 50,000 factories across the country. The contribution of this industry to the GDP is 3%. The sector manufactures more than 10,000 types of products.