To keep the internal yarn market more competitive and relevant, the national trade body for textile mills and manufacturers has asked for a 5 per cent VAT relief on sale of local yarn.
In the proposed budget for FY2019-20, export-oriented yarn producers have been given VAT exemption. The government, however, recommended a 5 per cent VAT on the import of polyester, Tencel, and viscose – the main raw materials for the textile industry. The decision is likely to cause the price of yarn to rise.
What does it mean?
The yarn makers – catering to local demands – will have to face Tk24 as VAT on the sale of a kilogram of yarn on the local market as a consequence.
The move will force many local yarn mills to shut down. The prices of lungi and sarees will also go up on the internal market.
What BTMA says
Mohammad Ali Khokon, president of Bangladesh Textile Mills Association (BTMA), has requested the government for continuing 0.25 per cent source tax on export receipts. He fears the facility might be removed at the end of this month as the proposed budget does not mention anything about it.
The BTMA chief also urged the government to withdraw 5 per cent advance tax on the import of textile machinery, spare parts, and other elements, which will increase the cost of doing business.
Expressing concerns about the recent government decision, Khokon made the calls at a press conference on the proposed budget at Sonargaon Hotel in Dhaka on Wednesday.
Polyester, viscose and Tencel have been enjoying tax-free import facility for the last five years. They are not taxable items as per the rules.
However, the customs department has been unjustifiably deducting a 5 per cent advance tax, Khokon claimed.
"The US-China trade war brought us a big fortune," said Khokon.
"We want to export to the US market. For that, the government needs to give us an export incentive."