GST impact: Pace of infra projects likely to take a hit

JAIPUR: Many infrastructure projects in the city, which are already moving at a snail's pace are expected to slow down further due to cost escalation after the implementation of Good and Services Tax (GST). The cost of ambitious elevated road and Jaipur Metro, phase I (B) and other projects is expected to increase by 12-15%.

The contracted firm for constructing the elevated road, Simplex Infrastructures Ltd (SIL), in a recent meeting had already expressed its helpless to continue with the project at the existing cost. A senior official source at JDA said, the estimated cost to construct elevated road between Ambedkar Circle and Sodala is Rs 250 crore.

"After GST, the awarded firm has demanded to increase the cost by 12%. If this happens the cost of the project will be increased by at least Rs 25 crore. It is under consideration whether the escalated cost will be borne by state government or contractor after examination of contract and other details," said a JDA official. Similarly, contractors who have been awarded work for construction of eight railway over-bridge (RoB) have also said that there will be additional burden after GST.

 

  

As majority of contractors are demanding relief in cost escalation, the JDA's finance department has sought directions from the state government for the same. "We have written a letter to the state government seeking directions for majority of ongoing projects.

In the contract of Dravyavati River, it was mentioned that increased cost due to any kind of tax will be provided by the state government," said a senior JDA official.

Similarly, the Jaipur Metro Rail Corporation (JMRC) too is staring at an additional financial burden of approximately Rs 100 crore as project cost of Jaipur Metro, Phase I (B) is expected to increase after the implementation of GST. The corporation has proposed an estimated cost of Rs 1,126 crore to construct 2.4 km underground corridor between Badi Chaupar and Chandople in the Walled City.

According to a JMRC official, cost escalation of minimum 15% is expected in the metro project. In the present situation, for the metro project, the state government has exempted value addition tax (VAT) and entry tax. Exemption of tax is also provided on purchase of various goods.

Officials claim, "There will be uniform policy for all the infrastructure projects and it is possible that the state government will revoke the tax exemption after GST," added a senior JMRC official.

Source::: The Times of India, dated 25/07/2017