BTMA president said the recycling mills in Bangladesh cannot use these RMG scraps to make fibres due to the 22.5% VAT, which turns the scraps into waste and pollutes the environment
Recycling all textile waste locally could save Bangladesh nearly $500 million in imports. Photo: Rajib Dhar
Bangladesh Textile Mills Association (BTMA) has demanded that the 7.5% VAT levied on scrap RMG fabrics [jhut] and 15% VAT on fibres made using such scraps be removed from the budget for FY25.
“We are required to pay a 7.5% VAT on the scrap RMG fabrics and 15% VAT on fibres made using them. The recycling mills in Bangladesh cannot use these RMG scraps to make fibres due to the 22.5% VAT, which turns the scraps into waste and pollutes the environment,” said Mohammad Ali Khokon, president of BTMA, during a press conference on the FY25 national budget in the capital today (8 June).
Noting that the industry can produce 1,200 million kilograms of fibre using these scraps worth $4 billion each year, he said, “We are currently importing such fibre from abroad using foreign currency. International buyers often set conditions for producing 30%-40% of clothes using recycled fibres.”
The BTMA chief called on the authorities to withdraw the VATs on RMG scraps, considering the sustainability of the products.
During his speech, the BTMA president also demanded the withdrawal of the 5% VAT on man-made fibre, and 5% advance tax, as well as 5% advance income tax on flax fibre.
“Chillers are essential to maintaining proper humidity levels inside textile mills. They are necessary machinery,” he said, noting that textile mills typically use chillers with a capacity of 50 tonnes or more.
“The government already reduced the total tax incidence on chillers from 104.68% to 10%. However, we believe it should go back to 1% considering chillers as capital machinery,” Khokon said.
He also requested that the RMG source tax be reduced from the current 1% to 0.5% and remain at that rate for the next five years, considering it the final settlement.
During his speech, the BTMA president said the textile and clothing industry faces issues due to the dollar crisis, inadequate energy supply, and the interest rate hike.
“In this situation, we demand keeping the same corporate tax until 2030,” he said.
“The 171 clause of the Customs Act-2023 states that any slight error in HS code would result in a 200%- 400% fine,” Khokon said, requesting the prime minister to withdraw this fine before the next budget.
