Tax on local garments irks boutiques

Customers of local fashion boutique houses pay more than those who buy garments from entirely import-based stores, manufacturers-cum-retailers claim because of the value added tax (VAT). The government in June tripled the VAT on homegrown boutique items to more than 5 percent, while levies on imported items were raised to 2 percent. Before the tax hike came into effect, both the fashion houses that promote made-in-Bangladesh garments products and the import-based stores paid a VAT of 1.5 percent. Local manufacturer-retailers said customers complain about the VAT rates.

They urged the government to lower the rate. However, Abdul Mannan Patwary, a member of National Board of Revenue, said the levy for branded items are mainly higher because they charge higher prices than non-branded items. The importers pay 3 percent tax when importing; but no additional tax if they also retail and their mark-up at retail is 20 percent or less. Retailers who do not import pay 2 percent, for a total of 5 percent VAT by consumers. "In the past, we used to absorb the 1.5 percent VATs instead of passing onto the customers, as the amount was too small," said Riyad Siddiqui, a director of Cats Eye, a leading fashion house.

"Now we are forced to pass on the taxes, as the increase is too high for us to afford," said Siddiqui. "At the end of the day, it is the customers who are shouldering the burden of paying extra." Hundreds of boutique houses directly import or buy from importers, and then sell the products in their outlets, local manufacturer-retailers said. "We don't have any problem against them, but the reality is our customers are paying more despite buying the made-in-Bangladesh garments [ … ] and helping local industries thrive," Siddiqui said. Set up in 1980, Cats Eye sells a total of four lakh units of shirts, pants, T-shirts and warm clothes per year in 34 outlets in the capital, Chittagong and Sylhet, and plans outlets in Khulna and Bogra.

Unlike the imported fashion houses, local brands such as, Aarong, Artisti, Ecstasy, Yellow, Westecs, Kay Kraft, Deshal, O2 and OG have manufacturing facilities and rely on their own designs. "It seems unfair when we are forced to charge our customers more to match our foreign-products-based houses," Siddiqui said. Hundreds of fashion houses have sprung up in the last few years across the country. Some big boutique houses have grown by 8 percent annually. The capital's Aziz Super Market alone houses over 200 fashion boutique stores. Some of the small houses report 30 per cent annual sales growth.

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