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GST payment issue paralyses cotton purchase in Khammam

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Traders of raw cotton in the Khammam cotton market are shell-shocked over 28 of them receiving notices from GST department for payment of ₹33 crore of general sales tax on cotton they had purchased from the market during 2017–18.

Following the notices, traders have stopped lifting raw cotton from farmers demanding resolution of the issue.

A trader clarified: “We have already paid GST on raw cotton lifted from farmers in 2017–18. As we had not been informed by GST officials, we paid GST under the sales head account, instead of purchases account. It is not our mistake. It is the fault of the government. GST officials should show us a way out by making available an adjustment option in payments. Our payment under a different head should not be considered fraud but a mistake,” he underlined.

Incidentally, the notice for payment of `33 crore of general sales tax includes penalty.

Cotton, under headings 5201 and 5203 of GST, falls in five per cent tax slab. But as farmers are not liable to pay tax and are not registered under GST, buyers of raw cotton will be required to pay the tax on reverse charge basis. GST should be paid on purchase of raw cotton from farmers and not its sale to ginning mills and cotton industries, traders contend.

GST officials have issued notices not just in Khammam, but also in Mahbubabad, Warangal and Karimnagar districts. It is estimated that the total amount payable will be around Rs 100 crore in Telangana.

Telangana State Cotton Traders Association vice-president Godavarthi Srinivasa Rao said, “We have already paid GST for the said year. The money has already gone to Central government’s exchequer. It is only that we have paid it under a different head, as GST officials had not educated us properly.”

Traders have given representations to Telangana finance minister T. Harish Rao and Union finance minister Nirmala Sitaraman in this regard. But the issue has not been resolved yet. The case is pending with the Ranga Reddy GST commissioner.

Traders say they will not be lifting cotton from market unless the GST issue is resolved. N Anand, Export Cell in-charge of Khammam Chamber of Commerce, said, “It is unjust on part of GST Council to impose a penalty on the amount already paid. GST may take the amount from our bank accounts on the pending tax. This will affect our payments to be made to farmers,” he stated.


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