Gov’t Proposes VAT Exemption of Textile Inputs

The Minister of State for Finance – General Duties, Henry Musasizi, on Thursday tabled before Parliament the Value Added Tax (Amendment) Bill, 202,5, seeking to, among others, exempt textile inputs from Value Added Tax (VAT).  

The Bill outlines the textile inputs for exemption as wet processing operations and garmenting, cotton lint, artificial fibers for blending, polyester staple fiber, and viscose.  

Others include textile dyes and chemicals, garment accessories, textile machinery spare parts, industrial consumables for textile production, and textile manufacturing machinery and equipment.  

The proposed amendments in the Bill will further see solar lanterns exempted from VAT, and such products include deep cycle batteries, solar lanterns, and raw materials for the manufacture of deep cycle batteries and solar lanterns.  

“The repeal of the VAT exemption on billets is intended to boost local production, reduce reliance on imports, and advance Uganda’s industrialization agenda,” said Musasizi.  

He added, “By supporting domestic manufacturing, this measure is expected to create jobs, enhance value addition, and stimulate economic growth.”  

Bio-mas pellets have also been lined up for VAT exemption, with the justification that this will promote environmental sustainability by encouraging the adoption of cleaner, energy-efficient cooking and heating solutions, reducing reliance on traditional biomass fuels.  

Further to that, aircraft supply is expected to be zero-rated once the proposed amendment is adopted.  

The proposed amendments also introduce the anti-fragmentation rule, a move the Minister said is aimed at combating tax evasion by preventing importers from intentionally splitting consignments to remain below the VAT registration threshold.  

“This measure is expected to enhance tax administration, improve revenue collection, and strengthen Uganda's VAT compliance framework,” said Musasizi.  

Under the proposed amendments, United Nations-related Agencies and specialized agencies will be designated as listed institutions.  

The Bill was referred to Parliament’s Finance Committee for consideration by the Deputy Speaker, Thomas Tayebwa.