Recent calls for the repeal of a two-stage value-added tax (VAT) on the acquisition of domestic textile waste and recovered cotton yarn from the trash were made by the Bangladesh Textile Mills Association (BTMA).
BTMA President Mohammad Ali Khokon urged the National Board of Revenue (NBR) chairman Abu Hena Mohammad Rahmatul Muneem in a letter to adopt a new harmonized system (HS) code for recycled cotton fiber to avoid complications about VAT and an extra charge on the items.
He asked the board to take decisive action to halt the export of all types of textile and clothing waste. The current VAT rates for recycling industries are 7.5% when buying domestic vendors’ textile waste and 15% when selling recycled cotton or fiber made from that waste to spinning mills.
As a result, spinning mills have little incentive to employ domestic recycled fiber since they can import virgin cotton duty-free, according to Khokon.
Only 5% of the garbage generated by the nation’s ready-to-wear industry, which generates between 400,000 and 500,000 tonnes yearly, gets recycled domestically.
If the waste produced by textile and apparel firms with an export focus could be recycled, he added, virgin cotton imports might be decreased by 30%, preserving $1 billion yearly.
Additionally, when Bangladesh leaves the list of least developed nations in 2023, it will face difficulties because garments going to the EU will be subject to higher tariffs, while clothing made from recycled fibers will be eligible for a 30% duty rebate, making Bangladeshi clothing more affordable. He recommended that NBR free the textile sector’s recycled industry from all types of taxes.
