Sales tax revenue of Hyderabad: no sweat!

‘The assumption that Hyderabad contributes nearly half to state’s revenue is far-fetched’

Published: 03rd September 2013 10:19 AM  |   Last Updated: 03rd September 2013 10:19 AM   |  A+A-

There has been much controversy over the revenue figures for Hyderabad. This has  become an unnecessary and irrelevant point in the discussion around the imminent de-merger of Telangana. Nonetheless, a lot of hot air, mixed with genuine emotion and  concern, is being generated around the subject. For a division-wise (not district- wise) break-up, you have to consult the latest Andhra Pradesh Statistical Abstract 2011 where the latest figures given are for 2010-11.

In 2010-11, the total collection was Rs 29,434 crore is on account of Andhra Pradesh General Sales Tax (APGST) plus Central Sales Tax (CST). CST is not the  state’s income, it only collects it for the Union government and it is levied on inter-state sales of enterprises registered  in the state. However, it is estimated at about 20 pc of the total.

The share of Hyderabad division, which includes Ranga Reddy district, in both APGST and CST is Rs 21,714 crore (that is, 74 pc of the total), of which Abids and Secunderabad sub-divisions alone contribute Rs 15,692 crore.

The figure circulated by the Congress high command is ridiculous and does not match 

the published official figures. It claims   “Hyderabad and Rangareddy districts (Greater Hyderabad or HMDA area) are contributing more than half of AP’s total tax collections.

While AP’s total tax collection in 2012-13 stood at Rs 69,146.5 crore, Greater Hyderabad area contributed Rs 34,100.73 crore to the exchequer. ‘’In two years, the revenues could not have gone up by so much!

Now, note the figure given is for ‘Greater Hyderabad or HMDA area.’’ The HMDA region covers a total area of 7,073 km with a population of over 7 million and comprises  all of the GHMC (population 5.4 million), Sangareddy and Bhuvanagiri municipalities as well as 849 urbanising villages (population 1.9 million) falling within 52 mandals and located in Ranga Reddy, Medak, Mahbubnagar and Nalgonda districts.

So, if the figures are for HMDA, they have to include total figures for Hyderabad division (Hyderabad and RR districts), Nizamabad division (Nizamabad and Medak districts), and Nalgonda division (Nalgonda and Mahbubnagar districts). Thus, the estimate that HMDA provided 50 pc of the state’s revenues may be near-reality, especially if it includes CST figures and other taxes also _ as the Congress high command note says “total tax”. So there is no clarity on what state sales tax revenues in Hyderabad district alone yield.

It could be in the range of Rs 17,000 crore or 80 pc of the total collection in Hyderabad division. This is after deducting APGST for Ranga Reddy district and CST for the whole. However, it is clear that many commercial enterprises which have sales all over the united state (and country) are registered in Hyderabad. Nearly 3,000 head offices of major companies and manufacturing units are said to be located in Hyderabad and pay APGST and CST.

After de-merger of Telangana, what will happen to the APGST levied on sales in the Seemandhra region but collected in Hyderabad? That is the main concern to the Seemandhra interests. CST is not the issue. The following points  will make the position clear.

1. Hyderabad division includes Hyderabad district as well as Ranga Reddy district with Abids and Secunderabad sub-divisions as the largest contributors

2. As of now, APGST paid by all enterprises which have registered offices in Hyderabad or Ranga Reddy will be credited to the Hyderabad division regardless of where the sales were made within the united AP state

3. On de-merger, if the enterprise registered office remains in Hyderabad division, then its sales to Seemandhra state will be treated as inter-state sales and attract Central Sales Tax (CST) for such sales, but not Telangana state sales tax.

4. If the enterprise shifts its registered office to Seemandhra state, its sales in Telangana state will likewise attract only CST but not Seemandhra state sales tax.

5. Enterprises selling across the whole undivided state will select the best  current rate (CST or either of the two states’ ST) and move their registered office accordingly. This has nothing to do with government.

6. Even if the APGST on sales to Seemandhra districts is Rs 10,000 crore, the de-merger will mean these sales will attract CST and not Telangana or Seemandhra Sales Taxes.

Similar is the case with sales from Seemandhra to Telangana. This is what the two states need  to discuss with the Government of India and get concessions and not quarrel with each other as there is nothing to gain from each other on this account.

So no great excitement is warranted and no quarrel needed over what will happen to state APGST revenues from the Hyderabad division when de-merger takes place.

The Union government will benefit through an increase in CST from both states. Here both the states can rationally and fairly ask that for the next five years any increase CST revenues be given back to the respective states which show an increase in CST after de-merger.

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