ENDING the existential crisis of Andhra Pradesh, the Congress Working Committee announced its decision to de-merge the Telangana region. Ever since, the regions have been in a state of turmoil as the question of Hyderabad remains unresolved fully.
Speculations are rife about its status and its significance in terms of revenue it generates. As if to put an end to the wild guess about the status, Union home minister Shinde stated just the other day that there were two or three options, one being the Delhi model in which the revenue goes to the state of Delhi. However, the CWC having said that Hyderabad will be the capital of both the states for a period of ten years the question that stares us is who will get the revenue it generates and in what proportion, if at all it is to be shared. But before one tries to find answers to it, one must get the facts and principles about revenue and taxaton straight.
TERRITORY: Inspired stories have been appearing in the media about the share of Hyderabad revenue. The fundamental flaw in all these stories is that Hyderabad is seen not as an urban district as depicted in the revenue records but as an extended area comprising large parts of Ranga Reddy, some parts of Mahbubnagar and Nalgonda districts. In other words, the perception about Hyderabad is that it is Hyderabad which the HMDA reckons for urban management and planning. This perception is utterly outrageous from a revenue district viewpoint as it violates the boundaries that are legally recognised. Mere geographical contiguity and commercial interface cannot form the basis for tinkering with the definition of urban revenue district. Conversely, it must also be emphasised that Ranga reddy, Medak, Nalgonda and Mahbubnagar districts have an administrative and territorial identity of their own. Therefore, firms registered in these districts, for instance under the VAT Act, will have to pay taxes to the territorial authorities.
Likewise, stamp duty on registration of a property located in these districts will necessary go to the respective district or jurisdictional authority. In the same vein, a motor vehicle registration and the concomitant tax will go to the territorial or jurisdictional authority. This principle equally applies to royalty/seigniorage on minerals. In other words, these major sources of revenue are location-specific and should belong to the administrative/political territory in which they are registered.
Therefore, to ignore the very nature and principles of taxation of these major sources of revenue and to attribute the revenue yield to the city of Hyderabad, to say the least, is a perverse attempt at projecting Hyderabad as a giant economic hub of the entire Andhra Pradesh without whose revenue contribution the state will not survive.
GHMC AREA: According to the official data for the year 2013, revenue from the GHMC area from the four major sources _ VAT, excise on liquor, stamp duty and motor vehicle tax _ is ` 8,960 crore, `941 crore, `651 crore and Rs 1,178 crore respectively. Thus, the total revenue yield `11,730 crore (this will be further less if Hyderabad Urban revenue district is reckoned) as compared to the revenue yield of `39,711 crore from the rest of the state does not lead to a conclusion that Hyderabad revenue is key to the issue of division of the state or status of Hyderabad.
MAJOR CONTRIBUTORS: Those who are labouring to prove that Hyderabad holds the key to entire de-merger issue or the status of Hyderabad will do well to appreciate that a large chunk of VAT credited in Hyderabad comes mainly from petroleum companies such as IOC, HPCL and BPCL and from AP Beverages Corporation (APBCL), a state monopoly trading body engaged in sale of liquor. On de-merger of Telangana and consequent formation of two states, these tax giants will necessarily register themselves separately in the respective states and VAT remittances will take place according to the sales in the respective states. Thus, this will further bring down the present levels of VAT revenue which is currently remitted in Hyderabad.
Further, quite a few manufacturing units, though located outside Telangana but registered in Hyderabad and remitting VAT to the local authorities, may choose to transfer their registrations and pay taxes in the residuary state of Andhra Pradesh. This will further dent the Hyderabad revenue. Likewise, it can also be expected that owners of commercial transport vehicles who may shift their business operations will pay motor vehicle taxes on all future transactions in the Andhra and Rayalaseema regions. Additionally, huge stamp duty revenue is expected to accrue to the residuary state of AP on account of demand for infrastructure creation and consequent contract agreements in the service sector.
UNWARRANTED FOCUS: Oblivious of these real and potential sources of revenues there is an unwarranted focus on Hyderabad revenues and the reasons are too well to known to all engaged in the discourse on de-merger.
Inasmuch as these taxes are consumption- based, the revenues will accrue to the respective states where consumption or commercial transactions take place. Therefore, the argument that Hyderabad contributes a major chunk of revenue to the state exchequer and, therefore, warrants special status, among other reasons, is untenable. Equally untenable is the argument for sharing of revenue generated from the city of Hyderabad.
Viewed in the backdrop of taxation principles it sounds ridiculous to apportion revenues from the city of Hyderabad. After all, how does one tax- payer residing in Hyderabad identify himself as belonging to either of the state and remit taxes to the respective state’s account?
In the unwelcome event of the Hyderabad urban revenue district being accorded a special status, its administrative expenditure will have to be funded by the Centre.
If the decision-makers choose to enlarge the boundaries of the existing Hyderabad urban district and conceive it as comprising the HMDA there may be a backlash from the Telangana state as a large number of mandals and villages of Ranga reddy, Mahbubnagar, Medak and Nalgonda district will get sucked into the metropolitan maelstrom and make life of its citizens miserable besides truncating these districts.
(The author is chairman of Telangana Commercial Taxes JAC)