GST NEWS

Inclusion of petroleum products will require recommendation of the GST Council. New Delhi: The GST Council has made no recommendation so far to include petroleum products,

The decision to increase the rates of petroleum levy and GST was taken in line with commitments given to the International Monetary Fund, otherwise the prices should have gone down by Rs8-9 per litre in line with decline in international prices. A part of this reduction was consumed by exchange rate loss while the government absorbed about Rs6 per litre reduction through combined increase in petroleum levy and GST rates. A straight increase of Rs4 per litre on petrol and high speed diesel (HSD) was affected through increase in petroleum levy of about Rs2 per liter and through GST.

Meeting in-person for the first time after two years, the GST Council on Friday reduced or waived cess on a large number of critical-use medicines but decided that this wasn’t the right time to bring petrol and diesel under GST. The Council also agreed that collection compensation cess, which is over and above GST, will continue to be collected on alcohol, tobacco products, large vehicles, coal and aerated water till March 2026 “for the specific purpose of repayment of loans taken’’ to pay states, said Finance Minister Nirmala Sitharaman at a media briefing in Lucknow. “There has been a lot of media speculation on whether petroleum products will be brought under ambit of GST. I make it absolutely clear that this came on today’s agenda purely because of the Kerala High Court order.

A PTI report has claimed that major revenue loss will make the addition of Petrol and Diesel into the GST regime less likely, citing disapproval from the central and state governments. Petro-products were excluded from the GST regime which came into force on July 1st, 2017. Currently, the highest VAT on petrol is levied in Mumbai, at 39.12%.

If sources were to be believed, India might bring jet fuel and natural gas under the GST regime. The proposal to impose a 28% tax on aviation fuel will be under consideration on July 21st when a tax panel will mull over the topic. If aviation fuels are brought under GST, airlines will find it easier to make payments as the rates will be uniform across the country.

A top official involved with GST implementation in India has revealed that the country might follow a combination of GST and VAT systems over fuels. The peak GST rate plus VAT will be equal to the present tax incidence computed by adding Central Government’s excise duty and state government’s VAT. The Central Government might lose some Rs 20,000 crore of input tax credit if fuels are brought under GST regime.

Though the recent hike in oil prices took a toll on the citizens, it seems that the newly implemented GST system boosted the revenue collected by the state governments in India. Conferring with a report presented by SBI Research, 16 out of the 24 states which follow GST system saw an increase in their revenue collection above 14%, below which the states have to be compensated.

Indian industrial body, ASSOCHAM has suggested Indian government to reduce taxes over oil, and to bring the ‘black gold’ under GST regime. This decision might make India's exports competitive; bring down current account deficit and depreciation of Indian currency. Noting that higher crude prices adversely affect fiscal and current account deficits of the economy, ASSOCHAM recommends that reduction in oil duties will be advantageous to the country's exports.