With the Punjab government mulling the imposition of entry tax on yarn being brought in from other states on lower or no Value Added Tax (VAT), textile and hosiery industry are in a fix as they will be forced to purchase yarn from the local industry in Punjab that has 6% VAT on it.
The state government after repeated requests and memorandum by spinners in the state has apparently decided to impose Non-Vatable Entry Tax on yarn being brought from other states, including Uttar Pradesh, Himachal Pradesh and New Delhi.
However, the textile and hosiery industry claim that levying of entry tax on yarn brought from other states would put a major impact on the industry in Ludhiana.
Industry leaders have also held talks with minister for industry and commerce Madan Mohan Mittal recently asking him that such a tax should not be levied.
On the other hand, the Punjab Spinners Association manufacturing yarn in the state had already asked the state government to either reduce VAT on yarn manufactured in the state or impose restrictions on import of yarn from other states.
The association had formed a steering committee last year that demanded that the state government should try to save the local yarn manufacturers.
Dinesh Lakra, president of Laghu Udyog Bharti, Punjab, said the state government had decided to impose a Non-Vatable Entry Tax on yarn being imported from other states and this had been conveyed to us through meetings with senior officials and the minister concerned.
“This will be a major setback to hosiery, blanket, shawl knitted fabric manufacturers and other textile industries of Punjab. This will make our industry uncompetitive and the spinners of Punjab will make a monopolistic cartel to charge high rates of yarn,” Lakra said.
The state government had levied entry tax on yarn even in 2008 but after severe criticism and court cases the tax was changed to ‘advance tax’ in 2013.
However, there is an exemption from advance tax if it is not a taxable item.
“If the state government wants to provide relief to the spinners of the state they should lower the tax,” he said.
Meanwhile, MM Vyas, president of Punjab Spinners Association, said import of yarn from other states into Punjab had caused major injury to the yarn manufacturers of the state.
“Yarn in neighbouring states is either free of VAT or has lower rate of tax as a result there was no level playing field for the yarn manufacturer of Punjab,” Vyas added.
He said entry tax could be levied by the state government if the state had similar tax on specific items.
Knitwear Club has decided to oppose the move of the government in case such a tax was levied.
Darshan Dawar, president of Knitwear Club, said industry would be ruined if tax was levied on import of yarn from other states.
A meeting of Madan Mohan Mittal with spinners as well as hosiery and textile industry is scheduled to be held on Tuesday in which the matter would be discussed in detail.