All textile items, currently exempted from value added tax, will attract 4 per cent VAT from the next fiscal, the empowered committee said on Thursday.
"From April 1, 2006, the decision is that all textile items would be brought under the framework of VAT. States have agreed that the rate will not exceed 4 per cent," empowered committee secretary Ramesh Chandra said.
However, formal notification to this effect would be issued by the Centre, he said.
Earlier, additional excise duty had been imposed on textile at the fabric level, sugar and tobacco under the Additional Excise Duty (Goods of Special Importance) Act in lieu of sales tax.
The AED had been collected by the Centre but given entirely to states. However, the 2004 Budget withdrawn the duty on textiles as a result of which the item does not attract either AED, sales tax or VAT at present.
The white paper on VAT has given exemption to sugar, textile and tobacco for this fiscal, after which it is expected to be reviewed.
The Confederation of all India Traders secretary general Praveen Khandelwal raised the issue of discrepancy in VAT rates on towel, shawl and blanket in Delhi and other states.
While Delhi has imposed 4 per cent tax on these three items, neighbouring states like Haryana have exempted them, he said.