Retailers, mostly garments shop owners in the city, have initiated a massive protest against a recent hike in value added tax (VAT) and entry tax on garments and several food items.

Most garments shops in commercial hubs such as Khetan Market, Hathuwa Market, Patna Market and others were closed on Thursday and readymade garments stores also joined the protest on Friday.

The owners protested against inclusion of saris and textile fabrics under VAT, and entry tax on procurement of garments from other states. Sweet-shops and confectionaries are also fumed over imposition of VAT on packaged food items such as samosas and kachoris.

"The state government is imposing excessive tax on garment retailers and those trading in several food items to increase its revenue. Neither entry tax nor additional VAT is levied on textile fabric and readymade garments in the neighbouring states, including Bengal, Jharkhand and Uttar Pradesh. Thus, such a move would lead to reduced sale of such items and increase corruption. It would in no way lead to any rise in revenue to the state exchequer," said Mukesh Jain, president, Bihar Garment Manufacturer and Retailer Association.

The commercial taxes department, through a gazette notification issued on January 13, revised VAT rates on several food items and goods, including garments.

According to the new rules, five per cent additional VAT is now levied on textiles fabrics sold in length, pieces or sets made wholly or partly of cotton, rayon, flax, artificial silk or wool or any other natural or artificial fibre.

Similarly, five per cent tax is now also levied on saris made, wholly or partly, of any natural or artificial fibre with a price tag of more than Rs 2,000 per piece.

Apart from VAT, entry tax is now levied on readymade garments, footwear and electronic equipments among others. The hike in taxes is expected to increase the revenue to the state exchequer by Rs 400 crore. ( See chart)

Retailers however, claimed that imposition of entry tax would lead to double taxation. "We are already paying sales tax and VAT on such items. Thus, additional VAT would lead to double taxation," said Vivek Kumar, a readymade garment shop owner at Khetan Super Market.

Officials in the commercial taxes department, however, claimed that no additional tax burden would be imposed on retailers. "The entry tax on readymade garments and other items included in this category is either equal to or less than VAT. Thus, the entry tax would be adjusted in VAT and the retailers would not be required to pay any additional taxes," said a senior official in the commercial taxes department.

The new taxation measures have led to a mass protest by the retailers in Patna and most other cities in the state. In Patna, hundreds of shops in various commercial hubs, including Khetan Super Market, Hathuwa Market, Lalji Market, Rajdhani market, Mauryalok Complex, NP Centre and Maharaja Kameshwar Complex among others were closed on Friday.

Sources claimed that there are around 40,000-50,000 retail shops trading in textile fabric and readymade garments. Most of these shops procure their stocks from cities, including Calcutta, New Delhi and Mumbai. "The additional entry tax would dissuade sales in Bihar and neighbouring states would benefit out of it. This would in turn, lead to fall in revenue to the Bihar government," said Hari Bhai, owner of a garment shop and a sari shop at Kankerbagh.

Officials in commercial taxes department, however, justified the increase in taxes. "Additional excise duty was charged on textile garments in Bihar till 2013 but the central government withdrew it that year. Thereafter, the finance department was empowered to impose additional VAT on it. However, even in increasing VAT on these items, the state government ensured that only expensive items are taxed. Beside, the additional entry tax would affect only those people who procure readymade garments from other states for personal use," said a commercial taxes department official.