Rs 7,500 cr stuck in VAT disputes slows business push in state
Amaravati: Nearly Rs 7,500 crore remains locked in long-pending VAT-related disputes in Andhra Pradesh, triggering growing concern among business leaders over stalled capital, rising litigation costs, and lost revenue for the state.
The disputed amount includes about Rs 5,000 crore in tax dues and Rs 2,500 crore in penalties. Most cases date back to the pre-GST era and have remained unresolved for years.
The situation has sparked debate in industry circles, especially as Andhra Pradesh continues to project itself on global platforms as having moved from “Ease of Doing Business” to “Speed of Doing Business”. “Thousands of crores are stuck in legacy disputes. This does not match the image the state wants to project,” a senior industry representative said.
Industry bodies, led by the Andhra Pradesh Chambers of Commerce and Industry Federation (AP Chambers), have urged the state government to introduce a dedicated settlement scheme for legacy indirect tax disputes. They argue that such a move could unlock working capital, reduce court backlogs, and improve the state’s investment climate.
“Several states have already resolved similar issues through structured settlement schemes. Andhra Pradesh is falling behind,” AP Chambers president Potluri Bhaskara Rao said.
The introduction of the Goods and Services Tax (GST) in 2017 replaced multiple State and central indirect taxes. While the reform simplified taxation, thousands of appeals under older laws such as VAT, CST, and entry tax remain pending across India.
For businesses, these unresolved cases mean blocked funds and mounting legal expenses. For governments, they translate into frozen revenue and reduced fiscal flexibility. “This is a dual challenge,” he said. “Companies lose liquidity, and the government loses cash flow.”
Several states have successfully addressed this problem through time-bound settlement schemes.
Maharashtra introduced a two-phase programme in 2019, offering partial waivers on tax and up to 95 per cent relief on penalties. Kerala and Karnataka provided 100 per cent waivers on interest and penalties for full tax payments. West Bengal allowed taxpayers to settle cases by paying just 35 per cent of outstanding tax.
These schemes helped States recover revenue quickly while sharply reducing litigation. “Such initiatives freed up administrative capacity and stabilised GST systems,” AP Chambers noted.
Industry groups said Andhra Pradesh can adapt these models to local conditions. A well-designed settlement scheme, they argue, would benefit both sides. Businesses would regain access to blocked capital. The state would mobilise revenue without lengthy court battles.
Bhaskara Rao said that the AP Chambers had offered to work with the government on policy design and implementation. “We are seeking timely intervention to improve Ease of Doing Business,” he said. “This will strengthen industry, support growth, and enhance State revenues.”
With Andhra Pradesh seeking to attract fresh investment, business leaders warn that resolving legacy tax disputes has become an urgent economic priority.
