East Africa agrees on tax waiver for textiles

The six-nation East African Community (EAC) comprising Burundi, Kenya, Rwanda, South Sudan, Tanzania and Uganda have agreed to a three-year tax waiver of duties and value-added tax (VAT) on textile raw materials, fabrics and accessories that are not available locally. This step is expected to reduce the cost of production and also boost local manufacturing. The three-year tax waiver was suggested in a report on the textiles and footwear sector, commissioned by the EAC.

As per the directive, the EAC will now shift to a four-band tariff structure for cotton, textiles and apparels to promote cotton yarn and fabric production. While imported raw materials not available in the region would attract zero duty, intermediate inputs would be taxed at 10 per cent, fabrics at 25 per cent, and ready-made garments at 40 per cent or $5 per kg.

EAC partner countries have also agreed to adopt a three-year strategy (2017-19) for gradual phase out of used clothing and shoe imports. This will be done through increased tax on these products, compliance with EAC Standards licensing of importers, and categorisation of products per bale of imports.