The State Government appears to be at loggerheads with the contractors executing works contracts projects, including the construction of irrigation projects, over the impact of the Goods and Services Tax (GST) over the sector.
The contractors have been expressing concern over the high slab under which the key ingredient cement has been placed. At 28% GST, the cost of cement is expected to increase further thus impacting the calculations of the contractors.
Contractors engaged in the projects are seeking reimbursement of total additional tax burden imposed on the project works after GST regime became operational. “Building contractors, particularly those who are executing works of smaller magnitude are facing crisis,” Builders Association of India national vice-president S.N. Reddy said.
According to him, the effective tax rate on cement previously was around 20%, including the excise duty and value added tax. “The total differential between the previous taxes and GST should be borne by the government. Contractors are not in a position to bear the additional burden,” Mr. Reddy said.
Senior officials, however, disputed the claims saying payment schedules for the contractors were made after factoring in the burden on account of various levies. “The government has in fact given directive to the departments concerned to pay 5% over the above the original schedule after taking into account the impact of the GST on key materials like cement,” a senior official said.
Initially, a memo has been circulated to the departments to make 10% excess payment over and above the agreed cost, but it had been subsequently brought down to 5% after the Centre had agreed to reduce the GST on work contracts from 18% to 12%. “The GST is likely to further go down giving a breather to the contractors as well as the government,” a senior official said.
Officials assert that while the tax rate on cement had increased post-GST, other costs including those of inputs like coal and limestone had been reduced. This was in addition to lesser freight costs due to efficient movement of fleet and ease of cross border movement would go a long way in offsetting the burden on account of the marginal hike in the GST on cement.