Textile mills in Rajasthan have been asked to pay four years’ entry tax on imports of yarn, dyes and chemicals, capital goods, spare parts, electrical goods and electronic goods. The industry says the levy of such a retrospective tax will not only hamper working capital but also break the backbone of the business.

What triggered the tax department to issue the letters to the mills is a Supreme Court order in October 2017 that upheld the validity of the entry tax. However, the judgment was only for the states of Kerala, Jharkhand, Orissa and Bihar.

Bhilwara in Rajasthan produces almost 45 per cent of the total yarn manufactured in India. The decline started with demonetization. With the Goods and Service Tax the entire system had to be computerized and prices of goods went up by 20 per cent leading to massive losses. More than 20,000 people are employed in the Rs 700 crore industry in Bhilwara, considered to be one of the textile hubs of India. Traders want minimal GST for all raw clothing categories including textiles, polyester yarn, wool and other materials. Further, textile traders have also sought tax sops for entities engaged in the business for more than 20 years.