HYDERABAD: Labourers working with Greater Hyderabad Municipal Corporation’s contractors could face pay cuts on ongoing projects as contractors try to plug losses due to Goods and Service Tax (GST) by reducing their wages. Contractors say they have to pay more for raw materials under GST and that the increased cost was not factored while bidding for GHMC projects.
The GST Council meeting on August 5 fixed 12 per cent GST on all government contracts. But for the 4,000-odd contractors with GHMC, some of the raw materials they buy now attract 18 and 28 per cent GST. “All government contractors in Hyderabad, elsewhere in Telangana and across the country will be facing similar issues,” said Hanumant Sagar, general secretary, Hyderabad Contractors Association. Smalltime contractors would be the most affected, he added.
Bhaskar C Rao of Malkajgiri, who has 12 civil contracts with GHMC operating with a 5 to 8 per cent profit margin per project, said that while bidding for the GHMC projects he factored into while preparing estimates on items based on pre-GST rates. “But post-GST the raw materials are taxed at different rates,” said Rao. “All my projects are now nearing completion but for the work done after July 1, I have to pay more,” he added.
Before the advent of GST, contractors used to club labour costs with raw materials. “If was buying cement for ` 340 a bag and I would add ` 20 to the bill as labour costs. We would also add our profit margin to this and then raise the bill. Now we will not be able to do that,” says Rao.
Contractors say that this will reduce their profit margins forcing them to try make up for the losses by reducing labourers’ wages. “We will be forced to pay them less. GHMC has asked us to show the receipts and will pay us only for those bills,” said Rao. “No Input tax Credit (ITC) claimed on labour costs, small contractors will have to include labour costs somewhere in the bills or else have to bear it from their profit margin,” said Sagar.
Wage cut will be a violation
Labour officials say that any move to reduce the wages of labourers will be a violation of the Minimum Wages Act, 2017. “Any contract will have workers’ salary specified in it. Any reduction in salary by the contractor would attract a fine 10 times the amount deducted by the contractor,” said R Chandrasekharam, joint commissioner of labour.