Guj, Maha cut tax on fuel, raise hopes of inclusion in GST

OIL MINISTER DHARMENDRA PRADHAN HAS BEEN PITCHING FOR INCLUSION OF PETROL, DIESEL, JET FUEL, NATURAL GAS , CRUDE OIL IN THE GST REGIME

MUMBAI/NEW DELHI/AHMEDABAD: Gujarat and Maharashtra on Tuesday cut value-added tax (VAT) on auto fuel in tandem with the central government’s decision last week to cut excise duty, stoking expectations that the inclusion of petroleum products in the goods and service tax (GST) may happen sooner than later.

The two state governments’ swift action on the central government’s appeal to cut local taxes on auto fuel suggested that close co-ordination in indirect taxes is possible even on products outside GST.

Bharatiya Janata Party (BJP)-ruled Gujarat reduced VAT on petrol and diesel by 4%, becoming the first state to give relief to consumers from a recent surge in oil prices.

The decision announced by chief minister Vijay Rupani in Gandhinagar will make petrol cheaper in the state by ₹2.93 and diesel by ₹2.72 a litre from Wednesday. Gujarat levied 28.96% VAT on petrol and diesel prior to the tax cut.

The Maharashtra government, also ruled by B JP, followed suit without delay. The state reduced VAT on petrol by ₹2 and on diesel by ₹1.

Maharashtra finance minister Sudhir Mungantiwar said on Tuesday that states are in principle on board with the idea of bringing petroleum products under GST although a decision has to be taken by the G ST Council. Oil minister Dharmendra Pr ad han too has been pitching for inclusion of petrol, diesel, jet fuel, natural gas and crude oil in the GST regime as it would ease the tax burden of oil and gas companies which at present are subjected to two streams of taxation, GST and VAT.

An official of the GST Council, when contacted, said on condition of anonymity that a proposal to include petroleum products in G ST has not been discussed at the Council yet although at a political level, the idea may be broached.

Mungantiwar said the new rates on petrol and diesel will be effective from Wednesday. He said the reduction of VAT will cost the exchequer Rs. 940 crore from petrol sales and Rs.1,075 crore from diesel sales. The state would try to makeup the revenue loss by adopting austerity measures, he said.

The central government cut excise duty on petrol and diesel by Rs2 last week, the first tax cut on fuel by the current government, to tame rising inflation. The recent spike in autofuel price, induced by refinery shutdown sin the US owing to violent weather, had an impact on the cost of living. Consumer price index-based inflation accelerated for the second consecutive month by 3.36% in August from 2.36% in July.

Pr ad hans aid on Tuesday that the G ST Council is the best example of a federal institution dealing with central-state issues and that a decision on inclusion of petroleum products will be taken by consensus .“The responsibility of people’s welfare rests equally with union and state governments,” said Pradhan.

While GST was being designed, the central government wanted crude oil and four petroleum products to be included in the new indirect tax structure, but these were kept out temporarily to accommodate the revenue concerns of states.