The country’s textile millers on Wednesday urged the government to withdraw the proposal to impose 5.0 per cent VAT (value added tax) on local yarn mainly to help the domestic traders retain their competitiveness. They also demanded withdrawal of the proposed 5.0 per cent advance tax on import of textile machinery, spare parts, some raw materials and other elements, arguing that it would discourage investment in the sector. “Local millers will have to pay Tk 24 as VAT on the sale of a kilogram of yarn in the local market if the proposed 5.0 per cent VAT on yarn is implemented in the upcoming fiscal year,” Mohammad Ali Khokon, president of Bangladesh Textile Mills Association (BTMA), told a post-budget press conference at a city hotel. Local fabric millers will not feel encouraged to buy the local variety of yarn and again the yarn market will be flooded with the imported ones, he said, expressing the concern. Some 60-70 per cent of the yarn of 50-80 counts is used in making local products like sharee, lungi and ladies’ clothes including salwar and kamiz, the BTMA chief said, adding that around 200 spinning mills are meeting the local demands for yarn. So, there is no commercial import of yarn in this case. If the proposed VAT is implemented, the local yarn mills will face closure and the price of local items will increase in the domestic market, he said, urging the government to withdraw the 5.0 per cent VAT as proposed in the budget for the fiscal year 2019-20. In case if the government cannot withdraw the proposed rate, it should continue with the current VAT rate or fix a specific rate as given in case of some other products, the BTMA chief said. He also urged the government to withdraw the 5.0 per cent advance tax on import of textile machineries, spare parts and other elements. The textile industry is capital intensive as modern, high-tech machinery are used in this industry. So, a huge amount of money is required to import those, Mr Khokon said, terming investment-friendly the current 1.0 per cent import duty on machinery. The industry needs further investment to enhance its competitiveness and also for BMRE (Balancing, Modernisation, Rehabilitation and Expansion), he explained. The industry often needs to go for BMRE. Polyester, viscose and tencil are the most important raw materials and are enjoying tax-free import status over the last five years, he said. As per the law, these are not taxable items. Despite this, the customs department has been charging 5.0 per cent advanced tax which is not justified, said the BTMA leader. “We think the proposed 5.0 per cent AT on textile machinery or others of any kind of manufacturing unit will hamper and discourage investment,” he said. The BTMA also demanded continuing with the source tax at 0.25 per cent on export receipts as the facility is going to be abolished on June 30. “The US-China trade war has created a big opportunity for us. The government should give us an export incentive for the US markets so that we can export more there to grab the opportunity,” Mr. Khokon added.
