VIJAYAWADA: The State government is all set to raise several objections over imposing Goods Service Tax (GST) on works contract services in irrigation and other public works being undertaken by the government during the 21st GST Council meeting scheduled to be held in Hyderabad on Saturday.
As Finance Minister Yanamala Ramakrishnudu had already wrote a letter to GST Council Chairman and Union Finance Minister Arun Jaitley, the officials representing the State at the meeting are set to raise the issue of GST on government works.Mentioning that contract services in irrigation and other public works were exempted from service tax during the pre-GST regime, the State government argues that there is a need to reduce the tax rate to 5 per cent.
Initially, the GST Council had imposed 18% GST on the works and later reduced it to 12% considering the requests made by the States. But, the State government, which is taking up a large number of irrigation projects and set to take up extensive construction activity in the near future, thinks that 12% GST will have an adverse impact on the irrigation projects and decided to mount pressure on the GST Council to reduce it to 5%.According to Finance Minister Yanamala Ramakrishnudu, works contractors used to pay 5% VAT under composition earlier and there was no Central Excise duty on conduit pipes used in the projects when the estimates were made.
As these works contracts are predominantly labour projects with some portion of the material component, the Input Tax Credit component is insignificant. With the rate of 12% also, there will be a substantial financial burden on the State government. Therefore, there is urgent need to reduce the tax rate to 5%, says Yanamala.The state government is also seeking the GST Council to exempt or reduce the tax on several commodities.
Tamarind was exempted from tax under VAT regime. But under GST, only fresh tamarind is exempted and dried tamarind, which is the main commodity used by common people in their daily cooking purpose, is made taxable at 12%. Tamarind is a forest produce gathered by tribals and marketed by Girijana Cooperative Corporation in State. Levy of GST on tamarind will seriously affect the livelihood of Tribals. Therefore, the government wants to exempt dried tamarind from the GST ambit.
The major consumers of biodiesel like Indian Railways, State transport undertakings, farmers and industrial consumers have stopped the purchase of biodiesel due to increase in the rate of tax under GST. Biofuels are being promoted all over the world as a green fuel to mitigate harmful exhaust emissions from diesel vehicles. There is a need to reduce the rate of tax on biodiesel from 18% to 5%, it argues.
These cars are environment-friendly and required to be encouraged. The GST is levied not only at the highest slab of 28%, but cess is also levied at 15% on par with other costly luxury cars. This is against the government policy of green environment. Therefore, cess may be removed or reduced to 3%, it argues.
The State government is also seeking tax exemption to the products of Tribal communities such as honey, coffee, turmeric, soaps, tamarind, soapnuts, shikakai shampoos, nannari and bilwa sharbat to encourage forest produce. The Girijan Cooperative Corporation of Andhra Pradesh procures and sells these products. In order to make these products competitive with other brands, these goods when sold by Girijan Cooperative Corporation Ltd, Visakhapatnam, may be exempted from tax. Alternatively, Girijan Cooperative Corporation Ltd, Visakhapatnam, and its affiliated Girijan Primary Marketing Cooperative societies should be exempted from registration under section 23 (2) of GST Act, demands the government.
It was exempted under the VAT regime. But under GST, dry fish is levied the tax at 5%. Observing that the fresh tax affects the fishermen community, the state government wants to GST exemption on dry fish. It also wants the GST Council to exempt fishnets and fishnet fabrics from the proposed rate of 12% GST.
The Napa tiles are kept under 28% GST slab. The Napa tiles are also used by low-income group people. Hence, the state government wants to reduce its tax rate to 5%.
Cotton yarn in hanks
In VAT regime, it was exempted. But, under GST, it is taxable at 5%. This is mostly used by Handloom weavers and it adversely affects the weaving community. Hence, this commodity should be exempted from tax, argues the State government.
Government seeks tax exemption on products of Tribal communities such as honey, coffee, turmeric, shikakai shampoos, nannaris etc
These goods when sold by Girijan Cooperative Corporation Ltd, should be exempted from GST
Girijan Cooperative Corporation Ltd should be exempted from registration under section 23 (2) of GST Act, argues the govt