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Textile millers seek 50% VAT cut on all yarn

Ibrahim Hossain Ovi
11 Feb 2022 00:00:00 | Update: 11 Feb 2022 11:05:25
Textile millers seek 50% VAT cut on all yarn
This undated file photo shows a female worker working at a yarn factory in the capital’s Tejgaon on Thursday– Shamsul Haque Ripon

The country’s textile millers have called upon the government to set value added tax (VAT) for all kinds of yarn regardless of fiber at Tk 3 per kilogramme in the next national budget for Fiscal Year 2022-23.

Currently, a miller has to pay Tk 6 as VAT for a kilogramme of yarn made of manmade fibre and other fibre. There is a high presence of artificial fibre as well.

Bangladesh Textile Mills Association (BTMA) president Mohammad Ali Khokon made the call in the organisation’s budget proposal for Fiscal Year 2022-23 placed to the National Board of Revenue (NBR).

“Both in domestic and international markets, different types of clothing products are being made of manmade and recycled fibre. They are becoming more popular to consumers due to their comfort, fancy and comparatively reasonable price,” said Khokon.

“Considering the present trend and the government priority of product diversification, the NBR should set VAT at Tk 3 on yarn made of manmade and recycled fiber.”

The association also proposed withdrawal of 15 per cent VAT and 5 per cent advanced tax on pet chip (textile grade), therapeutic acid and ethelene glycol.

Besides, it also urged the government to keep tax at source at 0.5 per cent and treat it as final settlement.

In Fiscal Year 2020-21, the government increased tax at source to 0.50 per cent from 0.25 per cent and kept it unchanged in the current budget.

On top of that, BTMA demanded withdrawal of 2 per cent tax on cotton purchase from local sources.

It also asked the authorities concerned to allow cotton waste from 10 per cent and 12 per cent to 17 per cent and 30 per cent to produce carded and combed yarn respectively.

The platform of the primary textile sector also demanded that the income tax be kept at 15 per cent for the sector till 2026.

Despite having a favourable investment environment in the country with political stability, the private investment in the textile sector did not happen as expected.

On the other hand, investments are encouraged in manmade fibre by the apparel makers due to rise in demand for these products, according to the proposal.

So, to encourage long-term investment, the government should increase deadline of the existing income tax rate till 2026, it added.

Meanwhile, BTMA has sought duty- and tax-free imports of fibre including the recycled one.

As there is no scope of misuse, the textile millers called for imposition of 1 per cent duty on imports of spare parts in the next budget, said the BTMA leader in the budget proposal.

Currently, the sector has to pay 26.2 per cent to 104.68 per cent import duty on spare parts used in textile mills.

However, they pay 1 per cent duty on import of capital machinery.

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