No impact of VAT reduction on mutilated rags

The decision of the Haryana government to reduce VAT on mutilated rags under the Haryana Value Added Tax Act, 2003, would virtually have no major impact on the woolen and shoddy mills in Haryana, even as the government claims otherwise.

The members of Woolen and Shoddy Yarn Mill Association maintained, apart from simplifying the process of refund for woolen and shoddy yarn manufacturers, the decision would have no major impact.

Panipat district in Haryana is one of the biggest producers of shoddy yarn with around 300 shoddy units. Mutilated rags imported from overseas are used by the industry in Panipat to produce shoddy yarn.

In its cabinet meeting held recently, the state government had announced its decision to reduce the rate of tax on mutilated rags under Haryana Value Added Tax Act, 2003 from 12.5 per cent to four per cent. According to the government, to boost the woolen and shoddy yarn industry, which was under pressure due to recession, the decision was taken.

President of All India Woolen and Shoddy Mills’ association Pawan Kumar Garg said earlier mutilated rags were not categorised under specified goods category but with their inclusion under specified goods category, VAT had been fixed at 4 per cent.

Association secretary, Suresh Gupta also said the decision would have no major bearing on the industry.