Telangana government has claimed that an exodus of businesses to Andhra Pradesh is underway after the new state came into existence in June this year, and there would be a significant erosion of the tax base once Hyderabad ceases to be the common capital.
"There are already incipient signs of about 3,000 dealers, businesses and trading houses shifting their base to the residual state of Andhra Pradesh. The momentum will pick up in the years to come.
"There will be erosion of tax base not only in respect of VAT, but also stamps and registration, motor vehicles tax and state excise," the Telangana government has said in a memorandum submitted to the 14th Finance Commission.
"The present tax base will witness massive erosion once Hyderabad ceases to be the common capital of the successor states of Andhra Pradesh and Telangana.
"The number of people visiting Hyderabad will come down drastically and there is likely to be a consequent fall in sales of petroleum products and other commodities," it added.
As per the Andhra Pradesh Reorganisation Act Hyderabad will be the common capital for ten years; thereafter it will be the capital of only Telangana.
According to the government, many dealers report sales (to tax authorities) only in Hyderabad though the products are sold all over (the erstwhile) Andhra Pradesh, creating a false picture that Hyderabad (and Telangana) has a huge revenue-generation potential.
