Spinning mill owners in Ludhiana, Punjab have accused the state government of deliberately pushing them into a crisis by not reducing rates of value added tax (VAT) on yarn manufactured by them. VAT on yarn in many states is either nil or 2 per cent whereas for manufacturers in Punjab, it is at 6.05 per cent, so the cost of production of local manufacturers is higher by almost 6 per cent compared to the manufacturers of other states.

A meeting was held recently, chaired by industries minister Madan Mohan Mittal to discuss and find solution to the issues being faced by the yarn manufacturers in the state, where industrialists also informed the minister about how 10 spinning mills worth close to Rs 800 crores were forced to shut their units due to the huge difference between VAT rates of Punjab against the other states.

Highlighting the issue, Akhil Malhotra, MD Shiva Texfabs, said that the Punjab spinning industry is facing problems due to piled up debts, low orders and huge difference between VAT rates of Punjab and other states, which is even forcing the mills to shutter their units.

He demanded that the only solution to this problem is reduction in the VAT rate to 3 per cent. Yarn manufacturer Sanjiv Garg of Garg Acrylics also pointed out to the issue of rising imports of yarn in the state of Punjab from other states. He said that around Rs 10,000 crores worth of yarn has been imported to Punjab last year from states like Uttar Pradesh, Himachal Pradesh and Delhi, where VAT is nil. He also stated that cut down in VAT rates for the industry would also result in the excise and taxation department earning extra revenue of Rs 300 crores as these departments will not have to pay VAT refunds to the garment industry.

Punjab.gov.in