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February 23, 2021

GST Council Should Consider Bringing Petrol Under GST Finance Minister

by CA Jessica Nagaonkar in GST

GST Council Should Consider Bringing Petrol Under GST Finance Minister

Since the rolling-out of GST, Petroleum, AFT and Natural Gases have been the topics of debate and concern that weather these items must be kept under GST or not and under which slab of GST. After various meetings and discussions, the GST council has not been able to reach a final conclusion to these questions. Petrol and diesel were kept out of the ambits of GST because these products are one of the highly taxed items by the government. They are not only a major source of revenue for central governments but also state governments.

Under Central Goods and Services Tax Act, 2017, Chapter 3 Levy and Collection of Tax, it is stated that the central tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council. This shows that government may some day in future bring petroleum products under GST.

Petrol not brought under GST by Budget 2021

Finance Minister Nirmala Sitharaman proposed many new measures in the Budget 2021 to prop up the declining economy amid the Covid-19 pandemic and boost spending across sectors. Budget 2021 focused on the seven pillars for reviving the economy – Health and Wellbeing, Physical and Financial Capital and Infrastructure, Inclusive Development for Aspirational India, Reinvigorating Human Capital, Innovation and R&D, and Minimum Government Maximum Governance. Several direct taxes and indirect taxes amendments were also proposed. However, none of the amendments proposed to bring petrol under GST

Comments by Finance Minister on why should the Govt consider bringing petroleum under GST

  • At a post- Budget discussion organised by Chennai Citizen Forum, Union Finance Minister Nirmala Sitharaman said that if we need a welfare state where the poor are attended, where the government intervenes in health and educational sector, then the need for wealth creation also has to be duly recognised.
  • The Union Budget sets India in right direction where the government only facilitates businesses with minimum regulation.
  • If avenues for earning tax are not widened, then governmental interventions in the health and education sector cannot be expanded
  • The Union Budget not only targets the vision of a five trillion-dollar economy by 2024 but also a robust private sector.
  • It is a wrong belief that one government can solve all problems of this country. The private sector and the government have to work together.
  • Sitharaman said the Goods and Services Tax (GST) Council should consider rationalisation of slabs.
  • On rising fuel prices, she said it is a vexatious issue. “The Centre and states both generate revenue from petrol. We can think about bringing petroleum under the GST. Maybe it is a solution.”

In the current scenario when fuel prices are soaring high there is pressure from all sides on the governments to bring petrol and diesel under the ambit of GST but the reality is that the central government is not solely responsible for bringing petrol and diesel under GST, it also depends a lot on states for which VAT charged on petrol and diesel is a major source of revenue specially for states like Andhra Pradesh, Maharashtra and Uttar Pradesh. In addition to these taxes in some states like Bihar there is an additional cess charged on petrol and diesel which make them even more expensive in these states.

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