Leather Leaders Lobby for Duty and VAT Relief on Chemicals to Boost Exports
Leather industry entrepreneurs have urged the government to withdraw customs duties and VAT on 43 types of chemicals used in tannery operations to help the sector overcome its current crisis.
To sustain Bangladesh’s second-largest foreign currency-earning industry and remain competitive in global markets, the Bangladesh Finished Leather, Leathergoods and Footwear Exporters Association and the Bangladesh Tanners Association (BTA) proposed this measure.
Under existing regulations, chemical imports currently receive duty exemption up to 5% of the value under certain conditions, but the VAT remains at 15%. The industry has proposed a new SRO allowing exemption of duty exceeding 3% of the value and reducing VAT on chemical imports from 15% to 7.5%.
On Wednesday, 8 April, these proposals were presented at a pre-budget discussion at the NBR Bhaban in Agargaon, Dhaka, chaired by NBR Chairman Md. Abdur Rahman Khan.
Business representatives highlighted that, compared to competitor countries like India, Vietnam, and Indonesia, Bangladesh cannot achieve export targets without lowering production costs. They stressed that for 100% export-oriented tanneries, complete withdrawal of withholding tax and VAT on the 43 chemicals and essential machinery used in raw material processing is essential.
Entrepreneurs also noted that raw hides are perishable agricultural products. According to the SRO issued on 26 May last year, a 3% withholding tax is currently applied on raw hide supply. They demanded the removal of this tax to make raw hides tax-free again.
According to the industry, granting these requests would make the non-bonded tannery sector competitive, reduce irregular or circuitous chemical imports, increase production and exports, and, in the long term, enhance government revenue.
Owners also referred to the 2019 NBR circular, urging that payments for electricity, water, and fuel in industrial factories be exempt from all types of VAT, and called for elimination of administrative harassment and corruption, as emphasized by the Bangladesh Finished Leather, Leathergoods and Footwear Exporters Association.
They stressed that the government should support the establishment of modern leather industrial cities to diversify products. Given the current global economic context, such policy support must be implemented swiftly to ensure sustainable development; otherwise, this major foreign currency-earning and employment-generating sector will face significant risks.
Additionally, to sustain Bangladesh’s second-largest sector in terms of foreign earnings, national growth, employment, and value addition, tannery owners presented further demands for reducing customs duty and VAT on chemicals.
They emphasized that raw hides, the primary raw material of the leather industry, are perishable and require prompt preservation. Chemicals are an essential component in this process. Except for water, salt, and some acids, most chemicals, capital machinery, and accessories are import-dependent. Currently, total taxes—including customs duty, regulatory duty, supplementary duty, advance income tax, advance trade VAT, and source tax—exceed 30%, driving up production costs and reducing competitiveness in international markets.
DBTech/SI/EK/OR
