Punjab yarn industry are losing out to cheap yarn coming from other states, making a serious dent on their business volume. After state government rolled back controversial E-Trip system, yarn makers in the state have now pitched for reducing VAT on yarn in order to compete with the commodity from other states.

Punjab levies 6.6 per cent VAT on yarn while some states like Gujarat, Uttar Pradesh, Rajasthan do not impose any tax on it, resulting into “dumping” of yarn into Punjab.

Punjab Spinners Association President M M Vyas said that they want the state government should reduce VAT on yarn which has been a long pending demand of the industry in order to provide them level playing field.

The state government had abolished anti-tax evasion measure e-trip system on cotton and yarn on January 30 due to which yarn traders claimed that they suffered considerable drop in business because of the anti-tax evasion measure. They welcome Punjab government’s step of rolling back e-trip.

Now they want government to look at addressing VAT issue on yarn on priority basis because of high VAT rate, neighbouring states are dumping yarn in Punjab at a cheaper rate which is hitting their business, said Punjab Yarn Dealers Association President Radhey Sham.

Industry has suggested the state government to bring down VAT rate to 2 per cent and impose one per cent turnover tax on yarn which will not only increase tax revenue to the state exchequer but will also curb corrupt practices.

A high powered six-member committee, including representatives of trade and industry set up by Punjab government to resolve industry’s issues has already taken up the matter with the concerned authorities to resolve the issue at the earliest.

Punjab produces almost 500 tonne of yarn including cotton, acrylic per day with maximum concentration of business being in Ludhiana.