Telangana Chief Minister K. Chandrasekhar Rao (KCR) will host a dinner for finance ministers of all states at his official residence in Hyderabad on 8 September, a day ahead of the GST Council meeting slated to be held here. The main purpose of his dinner meeting is to mobilise their support to his demand that the GST should be waived for all government schemes and contracts.

Currently, the Centre has proposed a GST of 12% on all governmental schemes that include all infrastructure building contracts. This is a climbdown from the originally proposed 18%. The Centre has reduced the tax on government programmes of the states in view of intense lobbying by the states, mainly Telangana.

KCR now wants this GST rate should either be brought down to zero or at least put at 5%. He has so far written three letters to Prime Minister Narendra Modi and Finance Minister Arun Jaitley on this issue and the ministers representing Telangana raised this issue at last several meetings of GST council. KCR’s son and IT minister K.T. Rama Rao was specifically sent to Delhi last month to raise this issue.

Sources close to Telangana Finance Minister Etela Rajender told The Sunday Guardian on Saturday that the Chief Minister was in touch with several chief ministers, including those from BJP-ruled states to seek their support to the demand. So far, the chief ministers of Gujarat, Bihar, Rajasthan, Madhya Pradesh, Maharashtra, AP and Tamil Nadu are learnt to have assured to look into KCR’s demand.

Telangana is one of the worst hit states by the GST higher slab as the state government has taken up projects and schemes worth Rs 1.25 lakh crore in different stages. Mainly they are related to supply of drinking water, irrigation and agricultural projects, housing and roads. KCR’s pet schemes like Mission Bhagiratha (drinking water scheme) and Mission Kakatiya (restoration of tanks) are hit by GST burden.

Senior officials in the finance department said that if the new rates of GST were to be paid, the state would have to incur an additional Rs 19,000 crore expenditure on the ongoing projects. The contractors had already made it clear that they cannot be expected to bear the tax burden and that the government should pay the extra money.

The government is not in a position to pay this amount as it was not provided in this year’s budget. Unless the money was released to the contractors, the works in different stages might not be completed, posing a major crisis like situation to the ruling party.  The CM has announced that he won’t seek votes in 2019 elections, if he fails to supply safe drinking water to all households by then.

Similarly, the 2BHK housing for the needy too will be hit if the GST component was not sorted out at the earliest. These two schemes, Mission Bhagiratha and 2BHK housing, are flagship schemes of KCR and any delay in their execution will cause damage to the political prospects of the ruling party, explained an official involved in the GST correspondence with the Centre.

Besides the waiver on government schemes, Telangana, along with some other states, will be pressing for reduction of GST on items like granite and textiles industry and beedi making units as they account for large scale employment in general. As these sectors are price sensitive, any rate hike would render many people jobless.

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