Vat hike could imperil plastic items industry

A proposed Vat increase for plastic household items would crimp the purchasing power of low- and middle-income earners, the country's dominant consumer class, and invariably threaten earnings in the overall sector, industry leaders have opined.

Finance Minister AHM Mustafa Kamal on Thursday proposed raising value-added-tax (VAT) on plastic household items like kitchenware, tableware and hygiene products to 7.5% from 5% for the fiscal year starting 1 July. The raise does not apply to other types of plastic products as well as tiffin boxes and water bottles, but would adversely impact the whole plastic industry, businessmen fear.

Dr Md Masudur Rahman, chairperson of Small and Medium Enterprise Foundation, told TBS that the government has proposed many beneficial facilities for the country's small and medium enterprises in the budget for fiscal year 2023-24. However, the plastic sector is an emerging one in the country and the proposed 7.5% Vat hike on the selected items would threaten its overall growth, Masudur Rahman added.

Commenting about the proposal, Shamim Ahmed, president of Bangladesh Plastic Goods Manufacturers and Exporters Association, told TBS that a rise in value-added-tax would make the mentioned household plastic products unaffordable for most buyers, reducing consumer spending. With the industry already struggling with input price hikes and power outages, reduced consumer spending due to the tax hike would end up shuttering many businesses in the sector, Shamim said urging the government to avoid implementing the move.

The plastic sector has around six to seven thousand mostly small- and medium-sized enterprises, meaning the sector remains vulnerable to consumer spending cuts on top of other existing issues, Shamim pointed out. In the total Tk40 thousand crore plastic product market, tableware, kitchenware and hygiene items account for nearly Tk12-13 thousand crore, Shamim added.

Kamrul Hasan, executive director of TEL Plastics, said in European countries the per capita plastic consumption is over 100 kilograms, whereas in Bangladesh it is merely 10-12 kilograms. Plastic consumption in the country is already low, so there is little need to reduce plastic use over environmental concerns, Kamrul suggested. If the government wants to reduce plastic consumption, they should focus on recycling products rather than decreasing their use, Kamrul advised authorities.