No VAT on import of raw materials for sanitary napkin
The National Board of Revenue (NBR) has exemp-ted value-added tax and supplementary duty on the import of raw materials for sanitary napkin and nappy for two years with a view to encouraging domestic production of the two hygiene products for females and babies.
The push comes at a time when penetration of the two health-related items remains low for a number of reasons including affordability.
“We have offered the benefit to make the products more affordable to commoners as part of our objective to attain the health-related Sustainable Development Goals (SDGs),” said Md Tariq Hassan, second secretary of VAT policy of the NBR.
The import duties and tax on finished sanitary pads have not been changed in fiscal 2019-20 though. Some 45 percent SD has been imposed on imported pads for the last several years now, according to NBR documents.
At present, local brands account for 80 percent of the market for sanitary pads and nappies. The annual market for sanitary napkin is about Tk 400 crore and it has been growing at 20 percent every year.
The nappy market, which registers 15 percent annual growth, is Tk 250-Tk 300 crore, according to industry insiders. More than half a dozen of local companies namely Square, ACI, Incepta, Social Marketing Company (SMC), Bashundhara and Pran make either one or both the products.
Jesmin Zaman, head of marketing of Square Toiletries, welcomed the waiver of the indirect tax.
Now, sanitary and diaper has been declared an industry, said Abdullah Al Zabed, director of tax and VAT of Square Group. “We expect the prices of our products to decline when we enjoy the benefits,” he added.
But to avail the benefit, firms will have to set up machinery on the factory premises, according to a notification issued by the NBR on June 30.
A company has to invest a minimum of Tk 75 crore and must have its own testing lab. It must also have clearance from the Department of Environment.
The firms will have to ensure at least 30 percent value addition and employ at least 250 Bangladeshi nationals in the factory to enjoy the benefit.
The interested companies will also have to apply to the NBR to get the scope of importing the six materials without SD and VAT, according to the notification.
Md Quamrul Hassan, business director of consumer brands of ACI, however, said VAT should have been exempted all throughout the value chain for sanitary napkins so that end users can get the product at lower prices.
“Sanitary napkin is a necessity for women,” he said.
Micro and small enterprises that make sanitary napkins using 100 percent local materials would face tough competition from the big firms though, said Mamunur Rahman, founder of Ella Pad that makes low-cost sanitary pads using garment scraps. Many small enterprises make pads using environment friendly products and market the sanitary napkins at cheaper prices, he added.
