Ending the prolonged stand-off between the state government and textile traders, Chief Minister N. Kiran Kumar Reddy on Sunday announced that cloth would be exempt from value added tax.
Amidst cheering and slogan shouting by the textile traders, Mr Kiran Kumar Reddy said his government had never intended to trouble the traders but took certain decisions in view of the unhealthy financial scenario in 2010 when he took over as the CM.
The government initially levied five per cent VAT on cloth, but later modified the tax structure, introducing one per cent tax on the total turnover. This did not appease the cloth traders, who went on an indefinite strike last month. The CM caved in and decided to abolish the turnover tax also on Sunday.
Significantly, the Commercial Taxes Department did not make much progress on realising the tax on instructions from the government not to force the issue. “We estimated that revenue could be around Rs 200 crore every year from the turnover tax,” a senior revenue official said. He added the government would also take a decision on waiving the arrears. “Money already realised from the traders, however, won’t be returned,” he said.
Earlier in the morning, representatives of cloth merchants associations met finance minister Anam Ramanarayana Reddy, minor irrigation minister T.G. Venkatesh, textile minister G. Prasad Kumar, and some MLAs, at the Secretariat, and held discussions.
CM earns ‘Mr Clean’ title from traders
Announcing that cloth would be totally exempt from value-added tax (VAT), Chief Minister N. Kiran Kumar Reddy said, “The government was due arrears of Rs 8,000 crore-Rs 9,000 crore since 2008 by the time I took over. We are still doing a tight rope walk with expenditure on welfare schemes crossing Rs 30,000 crore for which mobilisation of revenue is essential.”
Thanking the Chief Minister for the tax waiver, AP Textile Federation president A. Prakash made an offer on behalf of the traders to propagate government schemes. “If the government provides pamphlets and other campaign material on state welfare initiatives, we will distribute these among customers,” he said. He described the Chief Minister as ‘Mr Clean’ for providing transparent and corruption-free governance.