Trade wants VAT reduction on non-cotton yarn to Tk 3 per kg
Demand for non-cotton items is increasing in the local market
VAT on cotton yarn Tk 3 per kg, on non-cotton yarn Tk 6 per kg
Local clothing is worth $8 million
Non-cotton items account for 22%
The Department of Commerce has recommended that the National Revenue Board (NBR) sets Tk3 as VAT on sales of 1kg of yarn made from man-made and synthetic fibers – a similar rate which now applies to sales of cotton yarn in local markets.
Currently, the tax administration collects 3 Tk of VAT on sales of 1 kg cotton yarn and 6 Tk for non-cotton yarn.
Entrepreneurs in the textile industry have long called for a uniform VAT rate for all types of yarn sales. Taking this into consideration, the Bangladesh Trade and Tariff Commission recently sent a proposal to the Ministry of Commerce.
To meet the growing local demand for non-cotton yarn, the ministry finally sent a recommendation to NBR Chairman Abu Hena Md Rahmatul Muneem to lower VAT on sales of non-cotton yarn to Tk 3 per kg.
Local textile mills claim that an equal VAT rate on all types of yarn will reduce discrimination and encourage local mills to produce yarns other than cotton, which will stimulate investment and employment.
NBR sources said they would look into the matter in the next budget.
The local clothing market is also quite large and amounts to around $8 billion.
At present, all types of yarns, fabrics and other accessories imported for the manufacture of export products are duty free. But VAT is applicable on domestic sales of yarns produced by textile factories.
Previously, the VAT on cotton and synthetic yarns was the same. In FY21, the rate on non-cotton increased to Tk 6 per kg.
Md Khorshed Alam, chairman of Little Star Spinning Mills, a manufacturer of yarns for the local market, told The Business Standard that reducing VAT on synthetic fiber yarns will help reduce the prices of such fabrics in the local market. .
According to the Bangladesh Textile Mills Association (BTMA), synthetic yarn is commonly used in burkas, hijabs, salwars, some shirts and some pants.
Monsoor Ahmed, managing director of BTMA, told TBS that people with limited incomes are the main buyers of clothes made from these yarns. The demand for these clothes is increasing day by day.
Local entrepreneurs will be encouraged to set up non-cotton clothing manufacturing factories, enabling people to buy clothes at relatively low prices.
According to a report by the Bangladesh Trade and Tariff Commission, fabrics made from man-made fiber yarns are cheaper, more fashionable, more varied and more durable than fabrics made from any other yarn.
Bangladesh is not a cotton-producing country, so it should reduce its dependence on cotton, the report says.
If VAT on sales of yarns made from artificial and man-made fibers is lowered to Tk 3 per kg, the use of these yarns will increase, reducing reliance on expensive cotton yarns, the commission pointed out.
However, a senior official from the NBR’s VAT department told TBS on condition of anonymity that cotton garments are generally used by the poorer sections of the population, while artificial yarns are more expensive than cotton garments. cotton yarn in the market.
They will consider the Commerce Department’s recommendation in the next budget, he said.
According to the BTMA, the demand for synthetic yarns in the country’s market is increasing every year, which was around 5 lakh tons in 2020. Local production accounted for a third of that in that year. Almost all the yarns produced are for the local market.