Andhra Pradesh is losing revenue as it has not reclassified certain products, like excavators, that are manufactured in industrial parks in Andhra Pradesh, whereas neighbouring industrially progressive states like Karnataka and Maharashtra have recategorised the products. To avoid paying additional VAT, producers prefer selling their products in states like Karnataka. Deepak Kacker, associate vice-president of Kobelco, said, “VAT on excavators is around 14.5 per cent at present. We want it reduced to 4.5 per cent.”

The companies and Sri City have made several requests to the AP government seeking reduction of VAT. Sri City MD Ravindar Sannareddy said, “VAT percentage differs, based on classification. It is not more in AP. It is only due to classification. Products like cranes, excavators or toothpaste were not produced anywhere in the combined state. In other states, it was categorised as 8.5 per cent. Products need to be reclassified to streamline the tax regime.”