The Bangladesh Textile Mills Association on Wednesday demanded that the government scrap the 5 per cent advance tax on textile machinery and raw materials and the 5 per cent value-added tax on yarn it proposed in the national budget for the fiscal year of 2019-20.
The association made the demand at a press conference held at the Pan Pacific Sonargaon Hotel in Dhaka.
BTMA president Mohammad Ali Khokon said, ‘Five per cent advance tax on textile machinery and machinery in any manufacturing unit would hinder and discourage investment as it would make the investment costly and unprofitable.’
He said that imported raw materials, machinery, equipment and parts had been remained stuck in ports and could not be discharged due to complexities arisen after the imposition of 5 per cent tax on them, hampering production in the mills.
Khokon also said that the capitals of the mills would be blocked due to the ‘irrational’ tax cut on their machinery that eventually would create a severe liquidity crisis in the sector.
He said, ‘We think the existing one per cent import tax on textile machinery was one kind of incentive to the sector and investment friendly.’
The association also urged the government to withdraw the 5 per cent VAT it imposed on yarn in the proposed budget as the tax imposition would threaten the existence of the mills.
Despite the problems of yarn prices’ fluctuation in the international market and import of yarn, clothes and dress materials through tax-free facility and mis-declaration by local businesses, the spinning mills have been selling yarn 20-30 cent less than their production cost, Khokon said.
The spinning mills are facing 10-15 per cent price disadvantage compared with the strong competitive countries because of their locally produced raw materials and machinery.
However, the millers have been selling readymade yarn through various adjustments.
If the fresh 5 per cent tax proposal on the yarn is implemented, the millers would have to pay VAT Tk 24 per kilogram of yarn, he said.
The association also demanded keeping 0.25 per cent source tax on import proceeds to encourage imports.
The fixed rate of 0.25 per cent source tax on import value was effective until June 30, 2019, he said, adding that the rate was endurable and encouraging.
But, confusion arose as the proposed budget didn’t say anything about the taxation, he added.
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