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GST relief meagre on project works
Contrary to the expectations that the government would get relief from big financial burden from the reduction of GST on labour-intensive and low-cost material works from 12 per cent to 5 per cent, the Telangana government has found that the relief would be meagre under the new tax structure.
Hyderabad: Contrary to the expectations that the government would get relief from big financial burden from the reduction of GST on labour-intensive and low-cost material works from 12 per cent to 5 per cent, the Telangana government has found that the relief would be meagre under the new tax structure.
On the insistence of the Telangana government, the GST Council had reduced the GST only on works taken up with 70 per cent manual labour involvement only and works at its meeting in New Delhi on Friday. While the state Commercial Taxes department claimed the government would save Rs 8,000 crore on project works, the Finance department maintained that the GST relief would be applied to only to the labour-intensive Mission Kakatiya works and a few canal works taken up at the project sites only.
As per the agreements entered with the contract agencies in the state, the works involving manual labour and low-cost material in more than 70 percent of the works are the revival of water bodies under the Mission.
Under Mission Kakatiya, the total works are estimated to be done this year are not more than Rs 1000 crore. The government will have to bear Rs 50-crore GST amount which is to be paid by contractors to the tax collection authorities. The other labour-intensive works are construction of canals at some irrigation projects.
The expenditure incurred on such works was minimal, a top official of the Finance department told The Hans India that barring Mission Kakatiya and some canals, all the works taken up for the construction of irrigation projects, Mission Bhagiratha and road development works would not come under labour intensive projects.
In the official agreements entered with the state government, the agencies clearly mentioned that 80 to 90 percent of the works will be by use of machines and 10 to 20 per cent manual labour in the construction of the projects, reservoirs, Mission Bhagiratha works.
Unless the agencies re- enter fresh agreements and adopt labour intensive work systems, government will not get big relief from GST burden. Officials said the reduction of GST on labour will help the contractors to exploit the tax system. The agencies will change mechanised works into labour and evade tax.
It is estimated that government will have to cough up Rs 19,000 crore when the Centre announced 18 per cent GST. After the GST on projects was reduced to 12 per cent, the burden would down to Rs 14,000 crore.
By Patan Afzal Babu
