Bangladesh is reportedly mulling over exempting locally-produced recycled fibre and its raw materials from value-added tax (VAT) to protect the industry and reduce dependence on cotton imports.
The Bangladesh Trade and Tariff Commission (BTTC) recently proposed a full VAT waiver for both production and service stages for domestic producers.
Traders pay 7.5 per cent VAT now on the purchase of locally-collected clips or fibres, and an additional 15 per cent VAT at the point of sale. But there is no VAT on imported virgin cotton under the bond facility, reports fibre2fashion.
The cumulative production capacity of 23 companies involved in textile waste recycling is an estimated 0.22 million tonnes, a Bangladesh newspaper reported. Domestic textile waste generation is estimated at 0.57 million tonnes, which could reduce virgin cotton import costs by $1.0 billion.
Investment in the recycling sector is gradually rising, primarily due to an increase in domestic demand.
The European Union has mandated the use of at least 30 per cent recycled fibres in garment products from 2025, apart from announcing higher import taxes on garments that do not comply.
Bangladeshs recycled fibre producers believe they can reduce the countrys dependence on cotton imports by using recycled fibres as raw materials in spinning and composite mills.
The government exempts VAT on import and production of certain goods and services now, including local cotton waste and jute.
However, there is no such exemption at the manufacturing stage for the same product garnetted stock. This double taxation is pushing up the production costs for recycled fibre producers.
