Regulations on VAT payment of domestically manufactured fabric for export garment will not be abolished: MoF

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The Ministry of Finance requests businesses to comply with existing regulations on VAT. Photo: Internet.

Recently, the Vietnam Textile and Apparel Association (Vitas) has proposed to the Government and ministries to abolish the regulation on VAT payment for domestically manufactured fabric for exported garments instead of pre-tax payment and tax refunds later as per the current regulations.

The Ministry cited the Law on VAT as saying that the current tax rate is 0%, 5% and 10%. The 0% tax rate is levied on export goods and services according to international practices.

According to existing regulations, the fabric is imposed a 10% VAT rate. The business must pay 10% VAT when buying domestically manufactured fabric, and applied 0% VAT when exporting the product, and deducted and refunded input VAT.

According to the ministry, the VAT is an indirect tax levied on goods and services, and there are no regulations on incentives for businesses. Good and services for production, trade and consumption in Vietnam are subject to VAT payment, except for those not subject to VAT.

Therefore, the removal of regulations on VAT payment by enterprises using domestically manufactured fabric for export production or regulations on entities not subject to VAT payment will reduce the continuity of VAT because the domestic fabric sellers will be not declared and deducted input VAT, causing an increase in fabric price, and is inconsistent with the law.

The Ministry of Finance asks businesses to comply with the current regulations, and requires exporters to carry out procedures for input VAT refund of export products.