Tamil Nadu is not in favour of levy of Value Added Tax (VAT) on textiles and sugar from April 1, 2012, said Agri S.S. Krishnamurthy, Minister for Commercial Taxes and Registration.

Addressing the meeting of Empowered Committee of State Finance/Taxation Ministers on Monday in New Delhi, Mr. Krishnamurthy said Chief Minister (Jayalalithaa) had studied in detail the taxation of textiles and sugar and had directed him to inform the committee that the issue of taxation of these two items at this stage was not warranted.

Explaining the reasons, he said the issue of taxation of sugar was linked to a decision on purchase tax and subsuming of it in GST. Many States had expressed their reservations in this regard and an overall view needed to be taken before levying of tax on sugar.

As for textile industry, Mr. Krishnamurthy said it was facing a rough weather and the international situation was not conducive at present. In fact, the State government had levied VAT at the rate of five per cent on textiles from July 12, 2011, but withdrew the levy in view of the requests from various sections of the industry.

Its levy again from April 1, 2012, within a few months of its withdrawal would not be proper, as the ground situation for the textile industry had not changed much, he said.

Stating that deduction by the Centre in the CST compensation due to the State on account of non-increase in VAT rate from four to five per cent was unreasonable, he asked the Empowered Committee to take up the issue strongly with the Centre so that the amount due to the States was released without any further delay.

On the subject of bringing domestic natural gas and regasified LNG in the ‘Declared Goods' list, the Chief Minister has granted the government's consent in view of the environmental friendly nature of this fuel and its usage in critical sectors like power and fertilizer.

Many States had expressed their reservations in this regard