Welcoming the decision to reduce value added tax (VAT) on all kinds of yarn from Tk4 to Tk3 per yard in the proposed budget for fiscal 2020-21, the Bangladesh Textile Mills Association (BTMA) has demanded that VAT be removed altogether on all yarn.

It also urged the government to raise the existing alternative cash assistance from 4 per cent to 10 per cent for six months to compensate for the losses faced by export-oriented textile mills due to aggressive promotional strategies by competing nations. The association earlier proposed waiving VAT on all kinds of yarn as the industry had lost around Tk20,000 crore during the COVID-19 lockdown imposed by the government, it said in a press release.

A fixed Tk6 ad valorem VAT has been proposed to be imposed on yarn produced from man-made fibres (MMF) that, the association thinks, will not benefit the related textile mills due to a dearth of export orders for yarn and buyer shortfall the textile mills have been plunged into.

Therefore, BTMA urged a reconsideration of the proposal and clamping of a Tk2 ad valorem VAT on every MMF yarn. To stop unethical trading and protect the interests of the domestic industry, BTMA had earlier proposed changing the tariff structure of some Harmonised System (HS) coded fabric. However, as the budget did not reflect the issue, it urged the authorities to reconsider the matter.

BTMA also thinks a 0.5 per cent withholding tax on export prices of all types of readymade garments will be challenging for the textiles and readymade garment units in their struggle to survive in the global market in the COVID-19 context. It has, therefore, requested the government to fix the rate of withholding tax at the previous rate of 0.25 per cent.