Textile millers today demanded exemption of 5 per cent value added tax (VAT) on sale of local yarn to make the domestic yarn market more competitive.

In the proposed budget, the export-oriented yarn producers are exempted from VAT. However, the government imposed 5 per cent VAT on sale of yarn for local markets.

The yarn makers who are catering to the local markets mainly will have to face Tk 24 as VAT on sale of a kilogram (kg) of yarn in the local market.

Owing to this, the yarn users will not feel encouraged to purchase local variety of yarn. As a result, the local yarn market will be dominated by foreign yarn.

This will result in closing down of the local yarn mills. The price of lungi and sharees will also go up in the domestic markets putting the consumers under pressure.

Mohammad Ali Khokon, president of Bangladesh Textile Mills Association (BTMA) expressed his concern at a press conference on the proposed budget at Sonargaon Hotel in Dhaka.

Khokon also demanded the government for continuing source tax at 0.25 percent on export receipts as the facility of source tax will be removed at the end of this month.

The BTMA chief also urged the government to withdraw the 5 per cent Advance Tax on import of textile machineries, spare parts and other elements.

"A big opportunity has been created for us from the US China trade war. The government needs to give us an export incentive for the US markets so that we can export to the American markets," Ali said.

Polyester, viscose and tencile which are the most important raw materials for this industry are getting tax free import over the last five years. They are not taxable items as per the rules. In spite of this, customs department has been deducting a 5 per cent advanced tax which is not justified, Ali said.