• Notification Date: 02-12-2022
• Notification No: N/A

GST Payment issue paralyses Cotton Purchase in Khammam

Over 28 of the traders of raw cotton in the Khammam cotton market have received notices from GST department for paying an amount of ₹33 crore of general sales tax on cotton. The tax payment is related to their purchase of cotton from the Khammam market during the period of 2017-18. As a result, the traders have stopped purchasing raw cotton from farmers and are demanding resolution of the issue. 

One of the traders has stated that they have already paid GST on raw cotton lifted from farmers in 2017–18. But they paid GST under the sales head account, instead of purchases account as they were not informed by the GST officials about the matter. Hence, it is not a fault of the traders but of the government. There was no adjustment option available in payments. So, this should be treated a mistake made by the traders and not as fraud. But the notice for payment of Rs.33 crore of general sales tax includes penalty. 

Cotton attracts five per cent tax under headings 5201 and 5203 of GST. The farmers are not liable to pay tax and they not registered under GST. The buyers of raw cotton will be required to pay the tax. GST should be paid on the purchase of raw cotton from farmers, not on its sale to ginning mills and cotton industries.  

Notices have been issued by the GST department to traders in Mahbubabad, Warangal, and Karimnagar districts as well. The total amount of tax payable will be around Rs 100 crore in Telangana.State Cotton Traders Association vice-president Godavarthi, Srinivasa Rao said that the officials had not enlightened them about the matter properly. 

Traders have approached Telangana finance minister, T. Harish Rao, and Union finance minister Nirmala Sitaraman about the matter but the issue remains resolved. The case is pending with the Ranga Reddy 
GST commissioner.