The 5% VAT on cotton is not acceptable because, finally it is the farmer, who will suffer. VAT has been imposed on bales; so naturally, the bale purchaser will ultimately pass on this tax to the farmers”, a top official of Maharashtra State Co-operative Cotton Growers Marketing Federation Ltd (MSCCGMFL), said.
The Maharashtra state government had recently announced a package of Rs 20 billion for cotton farmers in the state, but alongside, also imposed 5% VAT on cotton. This is expected to result in cotton prices sliding by around Rs 200-250 per quintal.
Following the ban on cotton imports and subsequent partial withdrawal in the first few days of March, cotton prices have crashed from Rs 4,200-4,300 per quintal in the first week of March to Rs 3,400-3,600 per quintal last week.
Dr. N.P. Hirani, Chairman (MSCCGMFL) said, “This is not a welcome state and the State Govt. should remove it in the same way as they have reduced tax on gas from 5% to 3%. So, accordingly they must consider removing the tax on cotton also”.
He added, “VAT has been imposed on bales; so naturally, the bale purchaser will ultimately pass on this tax to the farmers. So, if the govt doesn’t remove this tax, farmers will probably receive Rs. 200 per quintal less than the current price, which will lead to a further reduction in prices.
“Due to this tax, cotton might be sold in adjoining states, which do not have VAT. Hence local ginning industry will suffer as they will not get cotton for processing. Moreover, the farmers will have to bear transport costs and ginning industry. The VAT will have an impact on Maharashtra cotton industry as well as farmers”.