Growth costs state GST sop

The state has become ineligible to claim compensation from the Centre for revenue loss occurred due to GST due to its higher growth rate.

This is a second hit that the state will take due to the Goods and Services Tax. The government is already facing an additional financial burden of over `19,000 crore because of the higher GST on work contracts for the construction of irrigation projects, Mission Bhagiratha and Mission Kakatiya, power projects and the 2BHK housing scheme.

The GST Act mandates that only states with a tax growth rate of less than 14 per cent are eligible for compensation from the Centre. Over the past three years, TS has witnessed a 16 per cent growth rate giving little scope for the state government to claim compensation.

As per preliminary estimates worked out by the Centre, nearly `10,000 crore has been earmarked as total amount to be distributed amongst the states that qualify for compensation this year, for revenue loss incurred on account of GST.

The states which will be eligible include AP, Chhattisgarh, Gujarat, HP, MP, Pradesh, Odisha, Punjab, Tamil Nadu, Goa, J&K and Jharkhand.

The government has pinned its hopes on the next round of GST Council meeting to be held in Hyderabad on September 9, where it will discuss the issues.

Etela Rajender, finance minister said the TS government will make all efforts to minimise its losses by putting the pressure on the Centre so that GST on work contracts is reduced and brought down to 5 per cent.

“Due to our persistent demand, the Centre has agreed to reduce GST on work contracts from 18 per cent to 12 per cent. We will strongly demand a further reduction to 5 per cent in the Hyderabad meeting. Since TS cannot claim compensation for revenue loss, the reduction in GST to 5 per cent would reduce losses to some extent,” he said.