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Punjab, Haryana Slash VAT On Cotton Spinners

• By  Textile Excellence
• March 26, 2016

The tax concessions announced by the governments of Punjab and Haryana in the past few days in their 2016-17 Budget proposals for the cotton spinning sector should help languishing units. Due to high value added tax (VAT), buying yarn from spinners in the state was costlier than bringing it from elsewhere. The Punjab government has said the VAT rate on cotton yarn will be 3.63%, from the earlier 6.05%. Punjab has 165 spinning mills with 4.25 million active spindles, and consumes 650,000-700,000 bales of cotton annually. Haryana has decided on zero VAT for cotton spun yarn; it is currently 5%. The state has an estimated 250,000 spindles, consuming only a part of the 2.5 million bales output. The government is offering incentives to enhance the consumption of cotton.

DCM Textiles, SEL Manufacturing and HP Cotton Textiles Limited are the three large units in cotton spinning in Haryana. "Punjab is a major consumer of cotton yarn in north and due to higher tariffs on local manufacturing, an estimated `9,000 cr worth of yarn is being imported annually from other states. The new tax structure will be a bulwark against dumping from other states into Punjab", said Kamal Oswal, the Vice Chairman and Managing Director of Nahar Industrial Enterprises Limited. Most of the spinning mills have been underutilising their capacities for the past few years as there were no takers for the yarn produced at a higher price.  The incentives offered by the emerging industrial hubs in states like Madhya Pradesh and Gujarat had curtailed the market of Punjab spinning sector in the past few years.

Textile Excellence