CM slashes VAT on textiles to 1%
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Chief Minister N. Kiran Kumar Reddy on Friday announced the governme-nt’s decision to bring down Value Added Tax (VAT) on textile goods from the present 5 per cent to 1 per cent.
The move is seen as a dampener for the state exchequer, which will lose approximately Rs 700 crore, while textile traders with an annual turnover of more than Rs 50 lakh would be the prime beneficiaries.
The CM’s decision came after a series of negotiati-ons between the textile tra-ders’ body and the government.
Mr Kiran Kumar Re-ddy, who holds the comme-rcial tax portfolio, wanted officials to introduce a new composite scheme in which traders will be given an op-tion of either paying 1 per cent or 5 per cent VAT.
Traders have to opt for 5 per cent if they want to av-ail input tax credit, though most are expected to prefer the 1 per cent scheme.
Significantly, the government’s decision to reduce tax came after Telugu Des-am floor leader in Legisl-ative Council D. Veerabh-adra Rao alleged that a section of traders was raising funds from the community with a promise to “manage” the government to get favourable orders.
Earlier, the CM had defended levying VAT on the textile trade, saying it would fetch the exchequer at least Rs 1,000 crore in revenue.
The Centre initially paid compensation to the states for phasing out CST but stopped it after a few years and directed the states to generate revenue from internal sources.
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