AP reduces VAT on textiles to 1%

N Kiran Kumar Reddy, the Chief Minister of southern Indian state of Andhra Pradesh, has announced that the state government has decided to slash the value-added tax (VAT) on textile goods from the existing 5 percent to 1 percent.

The decision was taken after several rounds of negotiations between the state government officials and the agitating textile traders in the state, chiefly represented by the Andhra Pradesh Federation of Textile Associations (APFTA).

The latest decision will primarily benefit textile traders in the state who have an annual turnover of over Rs. 5 million.

The Chief Minister was in favour of introducing a new composite scheme to give traders an option of either paying 5 percent VAT and avail input tax credit or just paying 1 percent VAT.

However, most traders are expected to prefer paying 1 percent VAT.

The textile traders in the state had stopped purchasing goods from other states since April 15, 2012 and had announced complete closure of establishments from April 30, 2012, to protest against the imposition of the 5 percent VAT on textiles.