The importers of textile materials and garments have up to December 31, to clear their goods under the old tax policy that provides for an ad Valorem rate of 35 per cent, Ministry of Finance has said.
An ad valorem tax is a tax based on the assessed value of an item.
Government introduced the import duty of 3.5 dollars per kilogram of cloth or 35 per cent of the value of the item, starting with the 2021/2022 financial year as per the budget read by Finance Minister Matia Kasaija.
Last week, the business community under their umbrella body Kampala City Traders Association, KACITA had announced a peaceful demonstration over the same issue.
However, government agreed to let them clear their merchandise which is already in transit at the previous rate.
Government says that the move is meant to encourage import substitution and promote the local industry. However, traders want the government to allow them to clear their goods based on the transaction value as opposed to weights.
Their threats to strike called for a series of meetings with textile importers, tailors and manufacturers with a view of finding the alternative duty rate.
Now, Finance Minister Matia Kasaija has directed the Uganda Revenue Authority to stay the tax per kilogram on imported textiles and garments until December 31.
He says this adjustment applies to the 47 categories of goods in this sector that can be manufactured in Uganda or easily sourced locally.
The stay of the per-kilogram rates should help the importers clear their goods that had already been ordered before the new tax policies were announced, according to Kasaija.
"For the 47 textile products which fall in the category of products that are locally produced and thus warrant protection, we are providing a window of up to December 31, 2021, during which URA shall stay the execution of the per kilo rate, and only apply the ad Valorem tax of 35 per cent, to clear goods that fall under this category," he says in the letter to URA. He says that this is a reasonable time for the traders "to adjust their business decisions" the Minister’s directive reads.