Bowing to pressure from textile and sugar traders, the Andhra Pradesh Government has toned down its order that imposed 4 per cent tax on these items.

In two separate notices, Mr Suresh Chanda, Commissioner for Commercial Taxes Department, said that there would be no VAT (value-added tax) on inter-State sales of both textiles and sugar.

The small textile dealers with an annual taxable turnover below Rs 5 lakhs are exempted. The marginal textile dealers with an annual taxable turnover above Rs 5 lakhs and below Rs 40 lakhs will be subjected to levy of tax at the rate of one per cent.

"Any goods including textiles, made-ups, zari articles and embroidery articles produced from handlooms are exempted and there will be no tax on such items. All fabrics, made ups, garments made of khadi cloth are also totally exempted and there will be no tax on such items," he said.

However, dealers are required to produce C-Form to claim exemption on such inter-State sales of sugar and textiles.

Strongly opposing the imposition of VAT, sugar traders alleged that the tax would take away whatever little margins sugar business offered them. Over one lakh textile traders had resorted to bandh twice in the last two weeks protesting against the levying of VAT.