New Delhi: Union Finance Minister Arun Jaitley said on Tuesday that the Central government is prepared to bring petroleum products like petrol, diesel, and LPG under the ambit of Goods and Services Tax (GST) but only after building a consensus with states.
Government Looking for State
“As far as the Central government is concerned, we are in favor of bringing petroleum products under the GST, let me categorically put it. But we will wait for the consensus of the states. And I do hope that at some stage sooner than later the states would agree to it,” Jaitley told the Rajya Sabha in reply to a question.
He said that petroleum products have not been kept out and were a part of the GST legislation but the decision to levy GST on these products can be taken only after the GST Council clears it with 75 % or three-fourths majority.
He added that no further amendment to any law would be required for the same as the 115th Constitutional amendment already provides for it.
Replying to a supplementary by Congress leader and former FM P. Chidambaram, Jaitley reported that the draft proposal for the GST-related Constitutional amendment presented by the United Progressive Alliance (UPA) government had not included petroleum products to be part of the GST “because the UPA knew it would be a deal breaker with the states”.
“After a great deal of discussion, we persuaded the states to bring petroleum products under GST. Initially, the states were not agreeing but later they reluctantly agreed to it. In meeting after meeting of the Empowered Committee, we persuaded them.
“And finally the deal with the states was that the GST Council will move ahead for bringing petroleum products under GST only after the states would agree to it,” Jaitley said.
If brought under GST, the cost of petrol and diesel will dip by close to 50% in Bengaluru. For instance, a liter of petrol which costs Rs 71.62 as on Monday would be available at Rs. 44.04, even if it is put under the highest 28% slab. If taxed at 12 %, a liter would cost only Rs 38.49.
The current tax burden
Petrol attracts 97.54% tax, including 67.54% central excise duty and 30% state sales tax (in Karnataka).If it is included under GST, the Centre and the state would lose over 50% of the revenue from the sale of fuel. The new GST regime has already cost Karnataka government Rs 200 crore in July, with the abolition of entry tax on petrol and diesel.
“Pradhan is right in proposing to include petrol and diesel in GST, as consumers will greatly benefit from this. We too have sent representations to this effect to both the Union finance ministry and the GST Council. However, it seems the Centre and the states won’t let this happen since they heavily bank on petroleum products for revenues and don’t want it disturbed,” said M Prabhakar Reddy, chairman, All-India Petroleum Dealers Association.