Non-cotton clothes may become costlier

Consumers are likely to pay more to purchase non-cotton apparels amid the country’s high inflation as the government is going to impose VAT on importing synthetic and artificial yarn and fabrics.

Ministry sources said Finance Minister AHM Mustafa Kamal may levy a 5 per cent VAT on importing non-cotton yarn and fabrics in his proposed finance bill at parliament today.

However, he is likely to propose VAT exemptions for all synthetic and artificial fabric waste at every stage under the HS codes 5402-10 and 5512-16.

Ministry officials said the move is aimed at giving privilege to local synthetic and artificial yarn and fabrics manufacturers, which will encourage entrepreneurs to set up factories, create employment, save foreign currency, and increase government revenue.

Export-oriented readymade garment manufacturers, however, will be exempted from the VAT as they are enjoying duty-free import facilities under bond licence. But if any exporter exports clothes without having the licence, they will also have to pay the VAT.

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan told The Business Post the VAT is likely to increase the prices of clothes in the domestic market but will not impact the export-oriented apparel industry.

“We, the manufacturers of export-oriented and local clothes, are meting almost 95 per cent of the synthetic and other artificial yarn and fabric demand through imports as the number of non-cotton mills is limited. On the other hand, people are living a miserable life due to the ongoing high inflation and economic crisis.”

Amid the situation, the government should not impose VAT or any other duty on any necessary goods, he said.

“We need to grow our domestic industry, and cash incentives for non-cotton goods exports could help achieve that goal as the cotton industry is already almost self-sufficient,” Faruque added.

The VAT may be imposed on HS codes 5402, 5410, and 5512-16. The products under these codes are all synthetic filament yarn such as nylon, polyester, acrylic, yarn of artificial staple fibres, woven fabrics of 85 per cent synthetic staple fibres, woven fabrics of 85 per cent synthetic staple fibres with cotton, woven fabrics of 85 per cent synthetic staple fibres mixed with cotton, woven fabrics of artificial staple fibres.