The Centre has pitched for bringing petrol and diesel under the goods and services tax after it itself cut the excise duties on the fuels and some states reduced VAT on them. The move comes as prices of crude have started firming up globally.Petroleum minister Dharmendra Pradhan said he had requested the GST Council to bring them under the purview of the GST.The Centre plans to put pressure on the states to cut VAT rates on the fuels and/or bring them under the new tax system in the next meeting of the GST Council in Guwahati next month.
The move comes at a time global crude prices have started rising and the benchmark Brent has touched the $60-per-barrel mark. India meets 82 per cent of its oil requirement from imports.While states such as Gujarat, Maharashtra, Madhya Pradesh and Himachal Pradesh have cut VAT, bringing down prices by nearly Rs 2.5 per litre, pressure is mounting on other states to follow suit.With polls round the corner, the government would be keen to douse the public resentment over high prices.”We urge states to take responsibility just like the Centre did, in consumer interest. If the states slash VAT (on fuel) by 5 per cent, consumers will get more relief,” Pradhan said.
The move to cut VAT comes after the Centre cut the basic excise duty on petrol and diesel by Rs 2 per litre. Bengal levies 26.87 per cent VAT on every litre of petrol and 18.47 per cent on a litre of diesel.The VAT on petroleum products contributed Rs 6,427 crore to the state’s exchequer last fiscal.For several state governments, VAT revenue from petrol and diesel forms a substantial part of their income and they are unwilling to part with it by putting the products under the GST.However, analysts said bringing petrol and diesel under the GST would not substantially reduce the prices of these fuels as they would be placed in the highest category of the 28-per-cent-tax slab along with additional cess.
Harpreet Singh, partner at KPMG, said “Since the current tax on petrol and diesel is quite high, the government can put the products in the 28 per cent slab and levy an additional cess. This will be similar to the case of demerit goods such as tobacco and luxury cars and will lower the impact on the exchequer when the products are brought under the ST.