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Govt cuts VAT on textiles; traders rue timing
November, 08th 2012

The state government on Wednesday issued an ordinance reducing Value Added Tax (VAT) on textile goods from 5% to 1% although the reprieve is being seen as having come a bit late what with it having been cleared in principle as far back as in April of this year. In the interim, traders have had to suffer harassment from the corrupt officialdom.

While the traders blamed chief minister Kiran Kumar Reddy, who holds the commercial tax portfolio, for the inordinate delay, his office (CMO) is sitting on similar issues such as tax waiver on pulses and reduction of VAT on plastic furniture.

"The chief minister has not been able to take out time and therefore the file is stuck at the CMO even though an in-principle nod has come from the departments of revenue and finance.

"As a result, corrupt officials are harassing the traders to make a fast buck," said Nitin Parekh, a commercial tax expert. Acknowledging the textile traders' argument that it was unfair to tax textile goods in Andhra Pradesh when they were exempted from the VAT in other states, the CM had agreed to reduce the tax burden on them on April 20 with the move designated to take retrospective effect from April 1. But his verbal orders had no effect on officials and the ordinance to the effect was not promulgated.

"The harassment was unbearable. The ordeal faced by the traders was a double whammy the customers were not willing to pay the 5% tax and the officials insisted on collecting it. There was no other go for them but to bribe the officials.

"The delay in the ordinance was unfortunate; but I am happy that it has at last come into effect," said A Prakash, president of the AP Federation of Textile Associations.

Traders of plastic furnitures and pulses are facing a similar situation. The CM had in August agreed to reduce the VAT on plastic furniture from 14.5% to 5%, and issued verbal instructions for the same.

But the change did not come in force as the GO (government order) has still not been issued. Here, too, the file is stuck in the CMO.

The reduction of tax on plastic furniture is significant as the higher rates in the state is leading to trade diversion to neighbouring states where, with the exception of Tamil Nadu where it is 5%, no tax is levied on these goods.

Calls for tax exemption on foodgrains and pulses are being made on the similar plea that these goods were tax-free in all states but AP.While the traders agree that the CM is sympathetic to the argument, they complain that the files were gathering dust in his office.

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