Textile millers yesterday demanded the government exempt them from 5 percent value-added tax on the sales of yarn in the local market with a view to becoming more competitive.
Export-oriented yarn producers are exempted from payment of VAT. But, the finance minister has proposed to impose 5 percent VAT on the sale of yarn in the local market in the budget unveiled last week.
Yarn-makers who cater to the local market will have to pay Tk 24 as VAT on the sale of a kilogramme of yarn if the fiscal measure remains unchanged.
“Because of the VAT, the mills will face tough competition from their competitors in countries such as China and India,” said Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association (BTMA).
“As a result, yarn users will not feel encouraged to buy the local variety and the yarn market will again be dominated by foreign yarn.”
He spoke at a press conference on the proposed budget at the Pan Pacific Sonargaon Hotel in Dhaka. Khokon also says local mills would face closure and the price of clothing items, especially lungi and sari, will go up in the domestic markets, putting consumers under pressure.
The association urged the government to continue the 0.25 percent source tax on the export receipts. The tax is expected to expire at the end of June.
It called for withdrawal of the 5 percent advance tax on the import of textile machinery, spare parts and other raw materials.
Polyester, viscose and tencile, the most important raw materials, have been importing tax-free for the last five years. Still, the customs department is deducting the advance tax which is unjustified, Khokon said.
“A big opportunity has been created for us owing to the US-China trade war. The government needs to give us export incentive in the US markets so that we can export more to the country.”