BTMA urges Bangladesh govt to cut VAT on buying of textile waste

Fibre2Fashion: The Bangladesh Textile Mills Association (BTMA) recently called for the withdrawal of a two-stage value-added tax (VAT) on the purchase of textile waste from domestic sources and recycled cotton yarn from the

In a letter to National Board of Revenue (NBR) chairman Abu Hena Mohammad Rahmatul Muneem, BTMA president Mohammad Ali Khokon urged the board to introduce a new harmonized system (HS) code for recycled cotton fibre to avert complexities over VAT and supplementary duty on the products.

He requested the board to take effective measures to stop the export of all kinds of garment and textile waste.

Recycling industries now pay 7.5 per cent VAT while purchasing textile waste from domestic vendors and 15 per cent VAT is applicable for selling recycled fibre or cotton produced from that waste to spinning mills.

Therefore, there is no incentive for spinning mills to use domestic recycled fibre as they can import virgin cotton free of duty, Khokon said.

The country’s readymade garment industry produces around 400,000-500,000 tonnes of waste annually and only 5 per cent is recycled by domestic firms.

Virgin cotton imports could be reduced by 30 per cent that could help retain $1 billion annually if the waste generated by export-oriented textile and garment factories could be fully recycled, he noted.

Moreover, after the country graduates from the least developed country status in 2023, it will face challenges as higher tariffs would be imposed on garments exported to the European Union, while those produced from recycled fibre would enjoy a 30 per cent duty rebate, making garments from Bangladesh cost-competitive, he added.

NBR should exempt the recycled industry in the textile sector from all kinds of duty, he suggested.