The textile industry of Tamil Nadu has appealed the state government to reduce VAT on raw cotton and cotton yarn cones from 5 per cent to 2 per cent which would be on par with the 2 per cent CST.
Southern India Mills Association (SIMA) in a press release said the industry in the state has been facing too many challenges in the recent past from acute power shortage, steep increase in the transport cost and also from the higher VAT.
It said that Maharashtra has reduced VAT on cotton cone yarn from 5 per cent to 2 per cent and West Bengal has exempted hosiery yarn from 5 per cent VAT posing severe challenges.
“As fabric and hank yarn are exempted from VAT, the evasion has become rampant during the last two years and created havoc for the honest mills,” the release said.
SIMA chairman, T Rajkumar, said when the VAT rate was increased from 4 to 5 per cent, weavers and knitters in Tamil Nadu started increasing their volume of cotton yarn purchase from neighbouring states.
He pointed out that the normal profit margin for a spinning mill is only 3 to 4 percent and the tax evasion by a few mills is seriously affecting viability of honest spinning mills in the state.
Reduction of VAT on cotton and cotton cone yarn would fetch more revenue to the government as currently over 65 per cent of the volume of business is taking place with fabric billing, hank billing and without billing, SIMA said.
T Rajkumar appealed to the Tamil Nadu chief minister to consider the long pending plea of the association and reduce the VAT on raw cotton and cotton cone yarn from 5 to 2 per cent.