Naveen Patnaik

Bhubaneswar / Cuttack, May 16: The Orissa government has levied 4 per cent value added tax (VAT) on sugar and textile products.

Orissa is the only state that has imposed VAT on sugar and textile products.

The BJD had launched a frontal attack on the Centre on the petroleum price issue by burning effigies of Prime Minister Manmohan Singh and UPA chairperson Sonia Gandhi.

On the other hand, it issued an order on May 3, 2011, for imposition of VAT on sugar and textile and asked for collection of 4 per cent VAT with effect from April 8, 2011.

The government officials said after the Centre had abolished the excise duty in lieu of sales tax, the Orissa government imposed VAT of 4 per cent. “As a state share, we used to get Rs 270 crore to Rs 300 crore from the Centre towards tax from sugar and textile. After abolition of the excise tax if we don’t impose the tax, the state will lose huge money. The state cannot afford to bear the loss,” said an Orissa government official.

However, the officials agreed that because of imposition of the VAT, the consumer are now paying Rs 2 more on 1kg of sugar.

“I used to buy sugar for Rs 32 a kg, but now it costs Rs 34. The hike will also hit my family. Neither the state government nor the Centre looks after interest of the middle class people,” said 31-year-old homemaker Sabita Mohanty.

The Federation of All Orissa Traders’ Association (FAOTA) has opposed the imposition of VAT on sugar and textile in Orissa. “We will wait for another week. We hope chief minister Naveen Patnaik will take a decision on our demand by then. We have already submitted a memorandum to the chief minister. But, we will be forced to take to agitation, if there is no response to our demand,” general secretary of the association B.K. Mohanty told The Telegraph today.

“Traders across the state will keep their shutters down on May 24 and 25 as a mark of protest. It will be followed up by stopping of all imports by traders,” he said.

However, the Orissa government officials said they were aware of the traders’ opposition to the imposition of VAT.

“They don’t want to come under the tax net. Once the VAT is imposed strictly, the entire transaction relating to sugar and textile import will become public. They will not be able to hide anything and this is the reason they are opposing it,” said an official.

The association represents nearly 2.5 lakh traders. It had, in its memorandum, pointed out that no other state in the country has imposed VAT on sugar and textile so far.

Sugar and textile have been subjected to the Entry Tax in Orissa to the tune of 1 and 2 per cent, respectively, which is not there in the neigbouring states. With addition of 4 per cent VAT, the tax burden would increase to 6 per cent on textiles and 5 per cent on sugar.

Consequently, both the commodities would now become costlier in comparison to other states in the country. This tax disparity will lead to smuggling of these goods from neighbouring states and the exchequer will not get the expected revenue.

Moreover, local trade will be affected.

“The domestic textile industry as well as the traditional weavers would be badly affected as their products would become costlier,” said C. Ravindranath, vice president of the association.