The Centre has virtually ruled out inclusion of petroleum products within the ambit of GST immediately, turning down repeated demands from the aviation sector and oil companies. Even the petroleum ministry had taken up cudgels for the sector that has been arguing that benefit of GST is not accruing to them as companies cannot claim input tax credit. The credit can only be claimed if the entire chain from inputs to the final product pays GST. The Centre is, however, of the view that the change in the regime may not pass muster with the states, which want to retain flexibility in taxing a few items that they have control over. Stamp duty on real estate, excise on alcohol and petroleum products are among the handful of items on which states still have control after the introduction of GST.
The overall levy is not going to reduce significantly as the government will impose cess above the 28% rate on petrol and diesel to ensure that there is no loss to the exchequer. Centre is also not keen on moving to GST for products such as aviation turbine fuel (ATF) or jet fuel, despite the high-decibel lobbying unleashed by airlines.
The government believes that the taxes on ATF,which according to airlines, is among the highest in the world, is passed on to consumers. To ensure that the transition to GST is tax-neutral, the Centre and the states will have to raise the levy on air tickets. Over the past two years, the government has discussed the possibility of shifting to a GST regime for sectors such as real estate, where under-construction units face the levy but on receipt of completion certificate, stamp duty is levied. But the Centre and the states have refrained from expanding the ambit, opting for the new tax mechanism to settle down.
