Telangana Chief Minister K. Chandrasekhar Rao (KCR) is immensely satisfied with the slash in GST (Goods and Services Tax) rate on public works taken up by the state government, a decision taken by the GST Council meeting in Delhi on Friday. This has been a long time demand of KCR for the past three months. Telangana officials put the estimated relief to government works at Rs 8,000 crore.
Apart from Telangana, the decision to reduce tax slab from 12% to 5% on government works would substantially benefit at least another nine states—Uttar Pradesh, Bihar, Maharashtra, Gujarat, Rajasthan, Madhya Pradesh, Andhra Pradesh and Orissa. These states have raised the issue of cutting rates on public works at the last GST Council meeting in Hyderabad on 9 September.
As a result of the GST Council decision, the Telangana government would benefit on around half a dozen major public work contracts, right from drinking water supply scheme to restoration of tanks and ponds and construction of roads and irrigation projects, whose combined expenditure would be around Rs 1.25 lakh crore this financial year.
Now the GST on these projects would stand slashed from 12% to 5%. Originally, when the GST was introduced on 1 July, the rate on public works was 18%, but the constant pressure mounted by Telangana either to make it zero or put it at 5% has resulted in decrease to 12%. Still, Telangana kept on lobbying for further reduction in tax rate.
Telangana Finance Minister Etela Rajender, who returned here from Delhi on Saturday morning, told The Sunday Guardian that the state was still not happy with some conditions imposed for passing the 5% tax benefit. The conditions include that at least 75% of projects should involve earth works or employ manual labour.
“This is not a problem for most of our ongoing projects as they include more than 75% of earth works and labour component; in some works, where big machinery and technology is involved, the relief might not be available to us. So, we will press our demand to expand the relief to all public works at the 23rd GST Council meeting in Guwahati on 9 November,” Rajender said.
Telangana would be seeking 5% tax relief on public works that consume plastic or PVC pipes for supply of drinking water to rural areas. The state finance minister had said that the CM was happy with some of the decisions of the Council like reduction of GST from 28% to 18% on granite stones used in houses. Telangana is a large producer and supplier of granite stones for construction of houses.