After failing to reach consensus on sharing of power and river waters, the Andhra Pradesh and Telangana governments have agreed on sharing the liability of input tax credit given to dealers.
The liability of the combined State in the form of input tax credit given to about 80,000 dealers was to the tune of Rs.1,398 crore at the time of the division on June 2.
Input tax credit is the tax paid on the purchase of goods by a dealer which is normally set off from the tax payable by him on sale of his goods (out put tax) in a particular month. In case, input tax exceeds output tax in any given month, it is carried forward in the subsequent month’s return. The credit that is to be carried forward is the liability to the State, which has to be either refunded or adjusted against future tax payments. Since the bifurcation took place in June, the liability has to be borne by both the States.
Since any liability should be borne on population basis in the ratio of 58:42 between Andhra Pradesh and Telangana as per AP State Reorganisation Act, the share of TS worked out to Rs. 587 crore. But the rules also stipulate that any liability should be discharged by the State in which the dealer was located, which meant that TS would have to bear greater burden since more dealers were in Hyderabad and its surroundings.
Official sources told The Hindu that of the 83,000 dealers who had availed input tax credit at the time of State’s division, as many as 52,000 were in Telangana and the rest in residuary AP. As a result, the TS government would have to discharge an actual liability to the extent of Rs. 787 crore as against Rs. 587 crore on the basis of population.
The sources said the figure of Rs. 787 crore was arrived at based upon geographic location of the dealers and the information furnished by them. While the actual credit available to dealers would have to be subject to verification and in case of some fraudulent claims, the amount of Rs. 1,398 crore could come down later, the sources said.
Following discussions between the officials of the two States, AP officials proposed to their TS counterparts that pending verification of the claims, the AP government would transfer a provisional amount of Rs. 100 crore to Telangana.
The officials also agreed that once the entire process was over, the total liability amount could be adjusted on population basis between the two States.
However, a senior official of the AP government said the distribution of liability should have been on the basis of consumption rather than population since the number of dealers located in AP were obviously far less at the time of division.
