Textile mills in the State have appealed to the State government to reduce the Value Added Tax (VAT) on yarn to two per cent from the existing five per cent.

According to the chairman of Southern India Mills’ Association, T. Rajkumar, while the Central Sales Tax (CST) is two per cent, the VAT is five per cent. Therefore, weaving and garment units in the State are able to get cotton at lower rate from other States compared to the yarn produced by the mills in Tamil Nadu.

Of the 4,000 million kg of yarn produced in the country every year, 1,800 million kg is from Tamil Nadu. The annual requirement of yarn by the weaving and garment units is nearly 900 million kg. Nearly 250 million kg of yarn from Andhra Pradesh, Telangana, Maharashtra, Rajasthan, Madhya Pradesh and Gujarat are sold in Tamil Nadu every year because of the difference in CST and VAT rates. The quantity coming in from other States has increased in the last two years.

Mr. Rajkumar said the State government will only see increase in revenue with reduction of VAT as more mills would sell yarn within the State. Though this problem would be sorted out with the introduction of Goods and Services Tax, the competitiveness of the mills in the State would be affected till then.

He also said that the State government should announce a comprehensive textile policy soon to attract new investments and also to sustain the existing units. The number of textile units in the State is large and the focus should be on value addition, improving competitiveness of the existing units and attracting new investments. Several other States have a textile policy, he pointed out.