The state government has put its decision to impose value added tax (VAT) on sugar and textiles from Sunday on hold.

Finance minister P C Ghadai made the announcement in the Assembly while Odisha Appropriation Bill, 2012, was being passed on Saturday.

Following a decision of the state cabinet, Ghadai, in his budget speech on February 24, had announced levy of VAT at the base rate of 5% on sugar and textiles, which were earlier exempt from VAT.

However, owing to protests from traders and taking into account the adverse effect it would have on the common man, the government decided to shelve it, official sources said. The government has decided to keep in abeyance levy of VAT on sugar and textiles, Ghadai said.

According to the FM, the decision to impose VAT on sugar and textiles was taken in tune with a recommendation of the Empowered Committee of State Finance Ministers. But many states have not yet levied the same. Some states had decided to impose VAT from April 1, but subsequently decided to shelve it.

Textiles merchant and traders dealing with sugar and other food items had threatened to stop importing the stuff unless the government withdrew its decision.