The revenue board collects Tk3 in VAT on sales of 1kg cotton yarns and Tk6 for non-cotton yarns.

Entrepreneurs in the textile industry have long been demanding the uniform VAT rate for all kinds of yarn sales. Taking it into consideration, Bangladesh Trade and Tariff Commission recently sent a proposal to the commerce ministry.

To meet growing local demand for non-cotton yarns, the ministry has finally sent a recommendation to NBR Chairman Abu Hena Md Rahmatul Muneem for lowering VAT on non-cotton yarn sales to Tk3 per kg.

Local textile millers say an equal VAT rate on all types of yarns will reduce discrimination and encourage local millers to produce non-cotton yarns, which will give a boost to investment and employment.

Sources at the NBR said they will review the matter in the next budget. The local apparel market is also quite large and stands at around $8 billion.  At present, all kinds of yarns, fabrics and other accessories imported for making export goods are duty free. But VAT is applicable on domestic sales of yarns produced by textiles mills.

Earlier, VAT on both cotton and manmade yarns was the same. In FY21, the rate on non-cotton ones increased to Tk6 per kg.