Thiruvananthapuram: The GST liability on contractors could be thinning our roads, say contractors who are keeping away from local self-government works. They say that the other contractors who take up government works quote low rates and compromise on the quality.
The contractors' associations have advised the members not to take up the works, but some do new projects. Around 90 percent of the contractors depend on overdraft or cash credit from banks. But the banks ask for work orders worth double the overdraft amount. The contractor will have to renew the overdraft limit every year, for which fresh work orders will have to be provided.
For most public works, GST is 12 percent of the total amount. In addition, a contractor has to pay one percent as income tax and another one percent for the construction workers' welfare fund. "Add to this 12-15 percent of the bank's interest, and almost 30 percdent of the estimate amount would be spent on everything but the work. The ones who 'under-quote' end up reducing the thickness of the base of roads or would not hire 'mixers' for their job. The quality takes a back seat," says Mr V. R. Rajesh, secretary, Thiruvananthapuram Corporation Contractors' Association.
The contractors have been demanding that GST should be included in the work estimate as the government is the end user. The finance department had issued a circular in December 2017 which said, "the payment has to be made to the contractor for total value of work plus the applicable GST."
After the Kerala Government Contractors' Association moved the Kerala High Court saying that several government departments were not following the circular, the court in July issued a verdict favourable to the contractors.
"It instructed the chief secretary to implement the circular in all government departments
