GST to hit irrigation, water supply projects, say analysts

CHANDIGARH: The high GST on irrigation projects will be a big blow for the irrigation and drinking water supply projects across the country. Putting the irrigation projects under 18% tax slab in GST regime will have a negative effect and hurt the entire ecosystem of farmers, retailers, distributors and urban populace in India, say analysts.

Vijay C Roy

Tribune News Service

Chandigarh, June 22

The high GST on irrigation projects will be a big blow for the irrigation and drinking water supply projects across the country. Putting the irrigation projects under 18% tax slab in GST regime will have a negative effect and hurt the entire ecosystem of farmers, retailers, distributors and urban populace in India, say analysts.

“The firms who have been allotted the tenders for laying of water pipelines for irrigation, canal and dams etc. will be charged 18% GST. This was earlier exempted under service tax laws,” said Keshav R Garg, a chartered accountant and faculty member for GST: Indirect Tax Committee of The Institute of Chartered Accountants of India (ICAI).

“Since no such exemption has been given under the GST regime, the firms who have been allotted such tenders shall have to pay 18% extra from their pocket. This issue will have far- reaching impact. It will force such allottees to compromise on quality to recover the huge amount of GST levy. The government should exempt such services because these services fall under the sovereign functions of the state government,” he added.

PS Kang, secretary, and SK Aggarwal, treasurer, North India Tubewell Drillers Association, said, “The 18% GST would be a big blow to the irrigation projects across the country and we may be forced to surrender the projects under execution as it will increase the cost significantly. For example, one of our members bagged drinking water supply project for five cities of Punjab with a total project cost of Rs 2.5 crore. Earlier, we were subjected to only 5% VAT in Punjab but now we will have to shell out 13-14% more which will make the project unviable. The government must reconsider the decision and bring down the tax rate.”

Earlier, concerned over high GST rates, Telangana Chief Minister K Chandrasekhar Rao has also written a letter to Prime Minister and Finance Minister stating that the massive infrastructure programmes such as drinking water supply projects and other irrigation works taken up by the state government with huge investments will be hit by the proposed GST rates, as costs are likely to increase substantially.