VAT a relief for textile traders

Ending the prolonged stand-off between the state government and textile traders, Chief Minister N. Kiran Kumar Reddy on Sunday announced that cloth would be exempt from value added tax.

Amidst cheering and slogan shouting by the textile traders, Mr Kiran Kumar Reddy said his government had never intended to trouble the traders but took certain decisions in view of the unhealthy financial scenario in 2010 when he took over as the CM.

The government initially levied five per cent VAT on cloth, but later modified the tax structure, introducing one per cent tax on the total turnover. This did not appease the cloth traders, who went on an indefinite strike last month. The CM caved in and decided to abolish the turnover tax also on Sunday.

Significantly, the Commercial Taxes Department did not make much progress on realising the tax on instructions from the government not to force the issue. “We estimated that revenue could be around `200 crore every year from the turnover tax,” a senior revenue official said. He added the government would also take a decision on waiving the arrears. “Money already realised from the traders, however, won’t be returned,” he said.

Earlier in the morning, representatives of cloth merchants associations met finance minister Anam Ramanarayana Reddy, minor irrigation minister T.G. Venkatesh, textile minister G. Prasad Kumar, and some MLAs, at the Secretariat, and held discussions.