Tax base of Telangana State set to erode !!! Sep 22, 2014 01:23 AM , The Hindu, Hyderabad State submits figures to Finance Commission. Such reporting was mainly because of the practice of billing being done in Hyderabad and goods being despatched to districts after that. The Telangana government expects its tax base to undergo a massive erosion once Hyderabad ceases to be the common capital of Andhra Pradesh and Telangana. There are already signs of about 3,000 dealers, businesses and trading houses shifting their base to Andhra Pradesh and the momentum will pick up in coming years which will reduce the share of Telangana in tax collections between 42 to 44 per cent. This was stated in the memorandum of Telangana government to the 14 Finance Commission on Friday. Issue of VAT It said there will be erosion of tax base not only in respect of value added tax (VAT) but also stamps and registration, motor vehicles tax and State excise. The emerging fiscal scenario is bleak and a matter of serious concern to the government due to limited revenue generating potential in eight out of ten backward and drought prone districts of the State and imminent erosion of tax in the remaining two districts – Hyderabad and Ranga Reddy. The number of people visiting Hyderabad will come down drastically and there is likely to be a consequent fall in sales of petroleum products and other commodities. Therefore, the government appealed to the finance panel to take into account the tax base erosion and increase in the establishment cost of the new State while assessing its fiscal situation for the next five years for the purpose of devolution of funds and grants-in-aid. Distorted picture The document said the practice of major assesses and Beverages Corporation paying VAT in Hyderabad for sales taking place all over the combined State had created a distorted picture of the revenue potential of the capital. It resulted in Hyderabad accounting for nearly 80 per cent of VAT collections. However, the share of entire Telangana in total VAT revenue will be in the range of 42 to 44 per cent because many dealers reported sales only in Hyderabad though the company products were sold all over the erstwhile State. Such reporting was mainly because of the practice of billing being done in Hyderabad and goods being despatched to districts after that. Secretariat expenditure A similar erroneous impression gained ground with regard to expenditure incurred in Telangana region of the erstwhile State because expenditure on departments in Secretariat and heads of departments released through the Pay and Accounts Office was booked in Hyderabad. This expenditure which was more than 24 per cent of the total expenditure was meant for the entire State and not Hyderabad alone.
Posted on: Mon, 22 Sep 2014 03:41:35 +0000
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