The Arvind Kejriwal-led Aam Aadmi Party (AAP) government in Delhi has presented a “zero-tax” Budget which slashed the Value Added Tax (VAT) on a wide range of goods to bring down prices of consumer products such as readymade garments.

Deputy chief minister, Manish Sisodia, who is also the finance minister, claimed that the Delhi government has registered a growth of 17 per cent in 2015-16 due to transparency and honest governance and the lower VAT would increase tax collections following rise in voluntary compliance.

It was also proposed to simplify the tax on textile and fabric which is now covered under several entries in the tax rate schedules, which means some are exempted from taxes while other are taxed at the five per cent rate.

Sisodia said he proposed to simplify this system by levying a uniform tax rate of 5 per cent on all variety of textiles and fabrics (including sarees) except khadi and handloom fabrics. Chief minister, Kejriwal said that Delhi’s Budget is a model for all the other states.

Meanwhile, textile traders are opposing government’s tax proposal for the textile industry as the uniform rate of 5 per cent on all varieties of textiles and fabrics except khadi and handloom would hit business.

Traders also pointed out that other manufacturing hubs like Surat, Mumbai, Malegaon, Erode, Gorakhpur, Kanpur, Amritsar and Ludhiana levy no blanket VAT on textiles and fabrics.

The Textile Association (India) member J B Soma, said that traders would write to the government to junk the hike.

Sanjiv Mehra, president, Khan Market Traders’ Association said with the raw material costing 5 per cent  more, the finished products would also cost more. Buyers would look at Gurgaon and other parts of Haryana because of this and Delhi would lose its distribution character.