States against govt plan to levy GST on petro products

NEW DELHI/MUMBAI : States have refused the central government’s appeal to bring petroleum products under the ambit of Goods and Services Tax (GST) even as prices of petrol and diesel continue to skyrocket in contrast to global standards.

Taxes constitute more than 50% of the price consumers pay for petrol and diesel. States, which charge sales tax and VAT (applied on top of the central excise duty) are reluctant to move away from the present tax regime unless the Centre promises special annual grants, top government sources told Hindustan Times.

Sources in the Union finance ministry said talks with the oil ministry is currently on but it’s the Goods and Services Tax (GST) Council, the highest decision-making body of the indirect tax regime, that will have the final word on the inclusion of petroleum products.

The Council is chaired by Union finance minister Arun Jaitley with all of his state counterparts as its members.

“It has only been two months since the Goods and Services Tax (GST) was introduced. We have to give time to the states to get over the teething problems before we start discussions on whether petroleum products should be brought under GST.

This matter is unlikely to be taken up immediately,” said a senior official in the finance ministry, refusing to be identified. For the states, moving to the GST for petroleum products could amount to a “loss” in revenue. While the Centre collects ₹21.48 as excise duty, states charge value added tax (or VAT, which varies from state to state, ranging between 25% and 48%) along with 25p as pollution cess with a surcharge.

In 2016-17, the combined revenue collected from the petroleum sector was ₹463,089 crore, according to figures available with the ministry of petroleum and natural gas. Of this, states’ share was ₹189,587 crore. Under GST, even if petrol and diesel are charged at the highest slab of 28%, states, which get a substantial chunk of their revenue from the sector, will stand to lose considering they will only get 14% of it — much lower than the present rate of VAT. “Taking the autonomy of taxing petroleum products away from the states will hurt our exchequer. States have freedom to change the VAT on petrol and diesel. But under the Goods and Services Tax (GST), this flexibility will go,” said a senior official in the finance ministry of a non-BJP ruled state.