In an attempt to minimise paper work and reduce reimbursement hassles, the Karnataka Government has decided to reduce tax rate to two per cent from five per cent for value-added tax (VAT) on purchase and sale of cotton.

Only a handful of States have adopted online filing for VAT reimbursements and traders and producers were finding it hard to procure Form C from other states. The State Government took the decision following cotton growers and traders demand.

The decision to this effect was taken at today meeting chaired by the Chief Minister, Mr D.V. Sadananda Gowda.

The State Government took this decision to do away with the practice of reimbursement, being practiced at present and returning the three per cent, Mr Lakshman S. Savadi, Karnataka Minister for Co-operation and Agriculture Marketing, said.

Welcoming the tax reduction, Mr B.T. Manohar, Chairman, State Taxes Committee FKCCI, said Reducing to two per cent on cotton in Karnataka will ease the obtaining of declaration From C under Central Sales Tax (CST) Act and relieve dealers claiming refund of three per cent tax paid to the State Government.

Traders and producers were finding it hard to procure Form C from other states claiming for concessional rate of tax in time was blocking their working capital, he added.

Mr Savadi defended hike in milk prices by Karnataka Milk Federation (KMF) and said Rs 2.5 of the Rs 3 hike is being passed on to the farmers.

Referring to onion glut in the market, Mr Savadi said over 2.26 lakh quintals of onion had been procured from growers in the northern districts. A sum of Rs 24.20 crore has been spent on procurement of the commodity from 7,524 farmers.

He said crop loans in drought-hit taluks in the state would be rescheduled for a year and one per cent rate of interest would be charged for the extended one-year period.