Sources told this newspaper that the Chief Minister, Mr N. Kiran Kumar Reddy, had convened a meeting with senior revenue officials on Friday to discuss the fall-out of the Centre's decision.

The state government is likely to pass on the burden if the Centre sticks to its stand, sources added.

The Centre had initially agreed to pay the state Rs.3,500 crore for 2009-2010, but reduced the amount by Rs.2,500 crore. It asked the state government to levy tax on textiles to raise the remaining amount.

“Accordingly the government levied four per cent VAT on textiles. The Centre also wanted us to enhance the four per cent rate and generate another Rs.1,100 crore,” a senior revenue official said, The government, however, retained the rate at 4 per cent as commonly used goods are included in this category.

This category includes food grains, pulses, medicines, cotton, chilli, bricks, SIM cards, coffee, fertilisers, pesticides, flour, utensils and even agarbattis. Though several states have enhanced the VAT

in this category, the state government effected an increase only in the higher category, from 12.5 to 13.5 per centage.

Source: Deccan Chronicle, India,  dated 13/08/2011