Protesting the decision of the state government to impose VAT (value added tax) at an enhanced rate of 5 per cent on textiles and sugar, the traders in the state have threatened to stop importing all essential commodities from neighbouring states with effect from April 1, the date the new levy comes into force.

We request the government through you to consider exemption of VAT on sugar and textile. Otherwise we will be compelled to stop import of essential commodities from other states from 31st March midnight and the government shall be responsible for future consequences, read a letter from Odisha Byabasayee Mahasangha (OBM) to all the district collectors.

The letter claimed that the commodities will now be priced higher compared to neighbouring states where there is no VAT on these items. This will cause a heavy financial loss to the state traders.
It may be noted that the state budget hiked the VAT rate from 4 to 5 per cent and included hitherto exempted items like sugar and textile under the VAT list. As a result, medicine, steel, food items, sugar and textile will become dearer for the consumers in the state from April 2012.

The tax rate hike and imposition of levy on sugar and textile are likely to generate additional revenue of Rs 530 crore for the state exchequer.

Orissa has imposed VAT on the sweetener and textile unlike the neighbouring states. Similarly, the state government also collects entry tax from the sugar and textile traders, which is not there in other states, the letter added.

The traders on March 18 had approached the state government to reconsider imposition of the levy on the textile and sweetener but it was in vain.

The association claimed that such a tax will create disturbances among the consumers and traders. After announcing VAT rate of four per cent on textile and sugar last year, the government was forced to withdraw the levy following intense pressure from the agitating traders.