Spinners want Tamil Nadu to reduce VAT on cotton, cotton yarn and man-made yarn to two per cent from the present five per cent. Tamil Nadu has a 55 per cent share of the total spinning capacity in India. But since cotton production in the state is insufficient, mills have to source it from other states. But logistics costs and fuel prices and various other factors have hiked their production cost making them less competitive compared to mills in other states.

Sale of cotton yarn in Tamil Nadu attracts five per cent sales tax, whereas it is only two per cent for yarn from neighboring states. This difference also increases the cost of finished goods within Tamil Nadu and on inter-state sales, making them expensive as compared to the price of yarns from other states.

Considering this, mills want Value-Added Tax (VAT) to be reduced to safeguard the spinning industry in the state and save livelihood of millions of workers in the textile industry. They also want the one per cent market cess levied on cotton waste to be abolished.

The VAT is a tax on the consumption of products. It is referred to as an indirect tax because it is typically collected by intermediaries (manufacturers, retailers etc.) rather than collected directly by the government.