National Board of Revenue (NBR) has waived value-added tax and supplementary duty on import of seven types of raw materials required for manufacturing sanitary napkins and diapers to protect the domestic industry and keep the two hygienic products for women and children affordable.
NBR issued a statutory regulatory order offering the benefit for two years up to June 30, 2021 on Sunday. Earlier, woman rights activists and consumers have been demanding withdrawal of VAT on sanitary napkins or pads at the retail stage to keep the price of the products affordable. The products are not luxury ones rather most essential for women to maintain hygiene during menstruation as the rate of use of sanitary napkins is very low among women, particularly among lower- and lower middle-income groups, in the country due to high prices of the items.
NBR exempted SD and VAT on six items with imposing conditions that firms will have to set up machinery in the factory premise to avail the benefit. According to the SRO, there will be no VAT and SD on import of re-seal/self-adhesive tape, laminated sheets, film and foil, other sheet, film and foil (printed), air laid paper, textile back sheet (ADL), elastic back ear/elastic waist band and knit loop tape by VAT-registered manufacturers.
As per NBR circular, minimum Tk 75 crore to be invested by a company. The company also needs to have its own testing lab. The producing firm also requires to have environmental clearance from the Department of Environment. The NBR also said that firms will have to ensure at least 30 percent value addition and employ 250 Bangladeshi in the factory to enjoy the benefit. The opportunity will remain on for two years, beginning from July 1 this year to end on June 30 2021.
Interested companies need to apply to the NBR to get the scope of importing the six materials without SD and VAT.
Earlier, 45 percent SD has been imposed on imported pads for the last several years, according to NBR documents. The waiver of VAT and SD on raw materials would allow local companies to grow further as they serve 80 percent of the sanitary pad and baby diaper market.
The annual market for the sanitary napkin is about Tk 400 crore and grows by 20 per cent annually. The baby diaper market, which also registers 15 percent growth, is Tk 250-Tk 300 crore, according to industry insiders. More than half a dozen local companies namely Square, ACI, Incepta, Social Marketing Company (SMC), Bashundhara and Pran make either one or both the products.
In reaction, industry experts welcomed the decision by NBR and expect that prices of those products will be reduced.