Even as the Goods and Service Tax (GST) Council is set to discuss inclusion of petrol and diesel under the ambit of the GST on behest of the Kerala High Court, a final decision on the issue is highly unlikely in the upcoming meeting of the council on September 17.
Multiple sources BusinessToday.In spoke to have said that a final decision on the subject is highly unlikely owing to the high revenue implications of the move, which both Centre and the states will not be able to bear amid the ongoing pandemic.
A source close to the development said, “The discussion on bringing petrol, diesel and aviation turbine fuel (ATF) will be limited only in the context of the recent directions of the Kerala High court.” In response to a public interest litigation, the Kerala High court recently asked the GST council to deliberate on the matter and make appropriate recommendations.
Another source pointed out the huge revenue implication of the move. “Currently, petroleum products account for revenues worth about Rs 2.5 lakh crore to the states. States will lose at least 50 per cent revenue if the petroleum products are brought under the ambit of the GST. The matter has been discussed earlier also in the GST Council,” the source said, adding that a final decision at this stage, when states need revenue amid the pandemic, is highly unlikely.
Sources in the Ministry of Finance, meanwhile, point out that to bring petroleum products under GST, an additional non-creditable levy may also have to be imposed over and above the slab rate on petroleum products. “This is an international practice and we will also examine it,” said a finance ministry source.
It may be noted that duty on petroleum products accounts for about 85 per cent of the total central excise. Central excise collection from petrol and diesel increased to Rs 3,34,300 crore in 2019-20 from Rs 1,72,000 crore in 2019-20. Similarly state VAT went up from Rs 1,60,500 crore in 2014-15 to 2,21,000 crore in 2019-20.
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