Except BJP, all parties, backed the Telangana Backward Classes, Scheduled Castes, Scheduled Tribes (Reservation of Seats in Educational Institutions and of Appointments or Posts in the Services under the State) Bill, 2017.
It will now be sent for the President's assent, Chief Minister K Chandrasekhar Rao told the Assembly.
Under the bill, quota for STs will be increased to 10 per cent from the existing 6 per cent, while that for BC-E category (the backward sections among the Muslim community) will go up to 12 per cent from the existing 4.
Speaker Madhusudanachari suspended all five BJP MLAs for today's special session as they protested carrying placards and sporting black scarves and called the bill "anti- constitutional" as it provides religion-based quota.
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The lone BJP member in the Council, Ramachandra Rao, also staged a walkout.
The BJP MLAs, however, were in support of the increase in quota for the STs.
Rao said if the Centre did not include the bill in the 9th schedule of Constitution (to grant it immunity from a judicial review), the state government will approach the Supreme Court to direct the Centre to do so.
"Why can't Muslims be given reservations? Are they sinners? They constitute one-fifth of the population of this country....Don't they pay taxes? Are they not citizens of India?" he asked.
"I am not going to beg the Centre (for assent). I am going to fight for it, if required. If the Centre does not come forward (to facilitate assent for the bill), we will raise the issue in the Parliament," Rao said in the House.
Increasing the reservations for Muslims was TRS' election promise and the people of the state had endorsed it, Rao said.
BJP floor leader G Kishna Reddy said reservations for Muslims were not justified as there was no caste-based discrimination in Islam, and that religion does not endorse reservations.
"Any reservations for Muslims are anti-Islamic. Dr B R Ambedkar also opposed reservations based on religion. 94 per cent of Muslim community in the state is covered by the new reservations. This would be a historic blunder of this government," Reddy said.
Meanwhile, police detained BJP workers in various parts of the city as they tried to march towards the Assembly.