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GST boost for Telangana, AP cos
The much-awaited Goods & Services Tax (GST) regime which will turn India into a single, borderless market is set to come as a godsend opportunity for the manufacturing companies from Telangana and Andhra Pradesh to make big inroads into the neighbouring Tamil Nadu and Karnataka markets where low taxes reign now.
Hyderabad: The much-awaited Goods & Services Tax (GST) regime which will turn India into a single, borderless market is set to come as a godsend opportunity for the manufacturing companies from Telangana and Andhra Pradesh to make big inroads into the neighbouring Tamil Nadu and Karnataka markets where low taxes reign now.
With Telangana and AP adopting high value added tax (VAT) structure, the overall cost incurred by companies in two Telugu states to manufacture various products is much higher than what their counterparts spend in the neighbouring states.
As the new GST regime, likely to be rolled out from April next year, will bring in uniform taxation across the country; companies from AP and TS will be in an advantageous position to effectively compete in Tamil Nadu and Karnataka.
“Companies based in Telangana and Andhra Pradesh couldn’t make much headway in Tamil Nadu and Karnataka markets till now because the latter levy lower taxies on many products, including food items.
Therefore, we are not able to compete there in many segments in general and agri-based products in particular,” Ravindra Modi, president, Federation of Telanganga and Andhra Pradesh Chambers of Commerce and Industry (FTAPCCI), told The Hans India.
But this scenario will change with the onset of GST and companies from both the Telugu states will be able to capture markets in Tamil Nadu and Karnataka thanks to the proposed uniform taxation, he observed.
Under the existing VAT structures, Tamil Nadu and Karnataka collect far less taxes on a large number of products when compared to TS and AP (see table). For example, bakery products attract 14.5 per cent VAT in the Telugu states while these items are exempted from taxation in both Tamil Nadu and Karnataka.
Same is the case with the components used in solar energy projects. Even commodities such as sugar and rice attract five per cent VAT in the Telugu states while there is no tax on them in the neighbouring states.
“We have represented to both the state governments about these tax anomalies which have been preventing us from competing in the neigbhouring states. But AP and TS governments continued with their tax policies. Thankfully, these anomalies will go away post GST,” an industry insider said.
Meanwhile, tax experts feel that manufacturing companies will have to sharpen their competitiveness and enhance productivity. “Henceforth, there will be no protection from the state governments and companies will have to survive on their own,” said S Thirumalai, Deloitte Haskins & Sells, and a leading expert on GST.
Valued Added Tax (VAT) on various products, commodities
| No | Product | AP | Telangana | Karnataka | Tamil Nadu |
| 1 | Bakery products | 14.5% | 14.5% | 0 | 0 |
| 2 | Electrical cables | 14.5% | 14.5% | 12.5% | 12.5% |
| 3 | Sugar | 5% | 5% | 0 | 0 |
| 4 | Pulses | 5% | 5% | 0 | 0 |
| 5 | Flour | 5% | 5% | 0 | 0 |
| 6 | Rice | 5% | 5% | 0 | 0 |
| 7 | Wheat | 5% | 5% | 0 | 0 |
| 8 | Chilli | 5% | 5% | 2% | 0 |
| 9 | Solar energy products | 14.5% | 14.5% | 0 | 0 |
| 10 | Polishing stones | 14.5% | 14.5% | 5% | 0 |
