The State textile dealers under the aegis of The Andhra Pradesh Federation of Textile Associations have been protesting against the five per cent levy of value-added tax (VAT). Traders from different states are coming to the Capital to make the bandh successful. The four lakh Andhra Pradesh retailors have closed their shops in support of it.

Consumers in Andhra Pradesh have to pay Rs110 for a Rs100 product by the addition of VAT at various levels. The consumers who are living in border areas and people who are making bulk purchase are going to other states to buy clothes, he said.The wholesale traders are purchasing products from various states and levying five per cent tax to sell it to retailers.

The small retailers may skip the traders to buy these products directly from the manufacturers in other states to avoid taxes. This will wipe out the whole business of textile traders.

This tax is breeding corruption. Many traders do business with a margin of 2-3 per cent. They are trying to escape five per cent of VAT and forced to take other options when they are caught by department. Some commercial tax department employees are already exploiting the situation at all the entry points into the State. This VAT will not bring in any revenues to the government but helps to fill the pockets of corrupt employees, said Davda.

There will be no increase in revenues to the government by collection of VAT. It is necessary to note, when NT Rama Rao has decreased VAT on a product from 5 per cent to two per cent, the VAT collection has gone up to the government.

Businesses started paying two per cent taxes directly rather paying money illegally to escape it, he explained.

Textile is the second highest employment generator after agriculture. This is a socially sensitive industry that employs unskilled, economically backward and illiterate workers. If the government does not respond to the situation by this month end, textile traders close their business and hand over the keys to respective collectorate offices. Such a scenario will create unemployment and one core socially backward people will be deprived of their livelihood, said Srinivas, Member of Joint action committee.

He said there is still a hope that the State government would understand the situation and abolish the tax to save the industry like in other states.

Source: Postnoon, India,  dated 24/01/2012