Kathmandu, Oct. 24: Nepal
Textile Association (NTA) has warned the government that they would shut all
the textile industries across the country from November 1 if their demand for the
adjustment of the Value Added Tax (VAT) was not addressed immediately.
A meeting of the textile
producers on Wednesday decided to shut about 200 industries in case their
demands were not met by the end of October. The NTA has sent its decision to
the Ministry of Industry, Commerce and Supply (MoICS), Ministry of Finance
(MoF), Ministry of Labour, Employment and Social Security (MoLESS), and
business associations such as Federation of Nepalese Chambers of Commerce and
Industry and Confederation of Nepalese Industries.
If the industries are
shut, more than Rs. 20 billion investment in the spinning mills and Rs. 7
billion in the textile sector, and 250,000 employees will be affected.
"We have urged the
government to reconsider its decision to annul the VAT refund facility, which
was made through the budget of this fiscal year," Shailendra Lal Pradhan,
President of NTA, said.
Textile entrepreneurs
had been expressing their discontent with the government regarding the removal
of VAT refund since the announcement of the budget of this fiscal on May 29.
“But the government has turned deaf ears to our genuine demands. Due to
the bad decision of the government the textile mills are forced to cut their
production by almost 50 per cent since the production cost went up suddenly,”
said Pradhan.
Due to the reduced production, the industries missed the marketing
opportunity during the largest festive season. According to the entrepreneurs,
they have lost almost 40 per cent business opportunity.
They accused the government of being indifferent towards the
entrepreneurs’ demand pushing the industries towards their death.
“The industries were getting 70 per cent VAT refund, and removal of this
facility has increased the textile production cost by almost 9 per cent,”
Pradhan said.
According to him, the government was getting 30 per cent of the VAT
anyway. Apart from that, raw materials producers and forward industries like
garments in the value chain have also been contributing to the revenue.
India has imposed only 5 per cent VAT on textile.
Textile maladies in Nepal do not end up there. About 80 per cent, about
800 million metres of cloth is imported to Nepal illegally from China and India.
A recent study of the NTA showed that Nepal needs 1 billion metres of
cloth for body wear and other commercial products like curtains, bags and
cushions.
Of the total cloth requirement, about 70 million metres are produced in
the country and about 130 million metres are imported legally.
“If the government didn’t adjust the tax rates, there is no chance for
us to compete with the illegally imported clothes. If there are difficulties to
address the tax adjustment demand, equal amount of grant should be provided to
the industries through other channels,” demanded the NTA.
Pradhan said that the government should establish a dedicated textile
department to promote this labour intensive sector and generate reliable
database required to create development strategy.
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