Telangana Government, which had laid a red carpet for Finance Minister Arun Jaitley and the delegates from all over the country and organised a royal dinner at the Falaknuma Palace was left highly disappointed by the decisions of the Goods and Services Tax Council.
Contrary to the high expectations of the Telangana Government the GST Council rejected its main demand that the tax on the construction of utility projects be reduced from 12% to 5% or zero percent.
The meeting which continued till late last evening had little for Telangana to cheer about.
Jaitley who chaired the meeting said that the calculations of Telanganah Government on burden of GST on utility projects were wrong.
The State Government had argued that the 12% GST will put an additional burden on the utility projects like housing for poor, irrigation and drinking water projects.
“Already the rate on work contracts of Government has been cut from 18% to 12%. Demand for more reductionIJ let Telangana get its calculations right”, Arun Jaitley said at the media briefing. He argued that the contractors will benefit more through input tax credit.
If the GST is reduced to 5% the State Government will have to pay back more money to private contractors.
The council decided to refer the demand of Telangana Government to the Fitment committee.
Telangana Finance Minister E Rajender hoped that the next council meeting in New Delhi will take a final decision on the demand. “We may get a clarity in the next meeting on work contracts”, he said.
Only silver lining for Telangana was the offer of the GST council that it will reduce the tax on Bhagiratha project provided the work was executed through a Government corporation and not the private contractors.
Council also agreed to reduce the GST to 12% on the Government buildings contract. This will benefit Andhra Pradesh more which is in the process of building a new capital and contractors were unwilling to bear the burden of GST.
The decision was a partial relief for Telangana also which is planning a new secretariat and legislature building.
Telangana Chief Minister K Chandrasekhar Rao has threatened legal action if the GST rate on utility projects was not reduced. Telangana government will chalk out its future course of action after the return of the CM who was recuperating in New Delhi after eye operation.