HYDERABAD: Union finance minister Arun Jaitley, who rebuked the state government for its wrong maths on GST rate on work contracts, has a reason to cheer. Some officials in the state finance department are supporting his argument out and out.
Sources, on condition of anonymity, explained to Express how Jaitley was right in his criticism of the state government on the issue. According to the sources, there were multiple taxes before the introduction of GST such as the central excise duty and state’s VAT.
On material components like pipes, cement, steel and others used for big project works, there were multiple tax rates ranging from 5 per cent to 28 per cent.
“Even if we calculated the average central excise duty on material components earlier as just 12 per cent, the contractors used to pay 5 per cent VAT to the state government. Then, the total tax liability comes to around 17 per cent. For a work valuing `100, the earlier tax was `17.
Now, under the GST regime, the single tax on work contracts has been reduced to 12 per cent. The tax burden on contractors has been reduced in GST,” an official in the state finance department explained. If the GST on work contracts is further reduced to 5 per cent, the state government will end up paying more money to contractors as they will get benefit through input tax credit. This logic makes the state finance officials support the Union finance minister’s argument.The sources further said the prices of cement and steel came down slightly after the introduction of GST, which is again a benefit for the contractors. Finally, it remains to be seen whether the state government will remain silent or further push its argument on the matter.
For third time, state cuts a sorry figure
The central government’s finding fault with the state government on finance matters is not the first time. Earlier, on two occasions, the the Center had disputed the state’s argument. First, it faulted the state for showing inflated growth rates. In the second instance, BJP president Amit Shah differed with the state on central financial assistance. “Amit Shah’s figures on `1 lakh crore central assistance to the state are correct. If anyone checks the same on the finance ministry’s portal, he or she can realise it,” a source said. In the third instance on Saturday, Jaitley told the state that its calculation on GST burden on work contracts was wrong.