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The Ministry of Commerce (MoC) has recommended the revenue board to withdraw the existing 22.5 per cent value added tax (VAT) on clothing waste recycling business as the sector's growth is being affected due to the tax.
It wrote to the National Board of Revenue (NBR) recently for taking measures in this regard to help the recyclers survive import competition.
Local recyclers collect wastes from garment factories and textile mills to prepare those ready for using by the spinning mills. Currently, they have to pay 7.5 per cent VAT at the collection stage and 15 per cent at the supply stage of their products.
The commerce ministry put forward the request to the NBR following a meeting with the stakeholders in the recycling sector, including Bangladesh Textile Mills Association (BTMA), held at the ministry in January last.
The meeting was told that the growth of the sector is being affected due to the VAT-induced production cost hike of recycled yarn. As a result, the local recycling mills cannot compete with the imported yarn.
In the meeting, the BTMA explained that the raw materials used by the recycling mills are waste collected from the local textile and garment industries and are recycled into yarn and fabric and then converted again as garments items for exports.