States want Centre to compensate loss if petro products brought under GST

States, including those ruled by the BJP, say the move to bring petroleum products under GST will adversely impact their revenue.

Updated on: Sep 21, 2017, 19:27:53 IST

By Chetan Chauhan

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Amid an outcry over spiraling fuel prices, state governments, including those ruled by the BJP, are opposing petroleum minister Dharmendra Pradhan’s suggestion that petroleum products should be brought under the Goods and Service Tax (GST).

Petrol and diesel prices have risen sharply over the past few weeks in India despite falling global crude prices. (HT file photo)

States say the move would adversely impact their revenue, which has increased by almost 50% for most states in the past three years on account of high value added (VAT) tax.

Consumers pay more than 100% tax –central and state levies combined -- on petrol and diesel which actually cost Rs 29.53 and Rs 29.12 after refining.

The Centre levies excise duty of Rs 21.14 on petrol and Rs 17.33 on diesel and the states imposes value added tax that ranges between 20-47%.

Pradhan has suggested that petroleum products should be brought under GST for uniform tax mechanism across India.

“We have appealed to all the state finance ministers to bring petroleum items under GST in the interest of consumers,” Pradhan told reporters on Monday.

State government officials said the issue was discussed threadbare at meetings of the empowered committee of state finance ministers before the GST was implemented from July 1.

The state finance ministers agreed that petroleum products and liquor – which contribute up to half of the states’ revenue -- should be kept outside the GST regime. The Centre had accepted the argument that bringing them under GST would result in huge revenue loss to the states.

“Bringing these products (petroleum and liquor) under GST has neither relevance nor propriety,” said Rajasthan’s representative in the empowered committee of state finance ministers Rajpal Singh Shekhawat. “The GST council took a conscious decision to keep petroleum products outside the GST ambit”.

Chief minister Vasundhara Raje holds the finance portfolio in BJP-ruled Rajasthan.

Uttar Pradesh’s commercial tax commissioner Mukesh Meshram also ruled out the possibility of lowering taxes on fuel. “Tax on diesel and petrol in UP is already lower compared to that in most other states,” he said, admitting that lower tax would mean huge revenue loss to the state.

Maharashtra government officials have also opposed the Centre’s move.

Kerala finance minister TM Thomas Isaac told reporters there was no question of agreeing to the Centre’s move to bring petroleum product under GST with lower rates.

“We and other states made it clear at the meeting with the Central finance minister that including petroleum and liquor under GST was not acceptable,” he said.

(Illustration by Hitesh Mathur)

Officials of other opposition-ruled states such as West Bengal, Kerala, Punjab and Karnataka have also opposed Pradhan’s proposal saying it will not be acceptable until the Centre “adequately” compensates for the revenue loss.

The Central government had expressed its inability to compensate such a huge amount during meetings of the empowered committee of the finance ministers on GST.

The Congress and other opposition parties have launched protests in different states against the high fuel prices when the global crude oil price was less than $ 50. Last time, the petrol price crossed Rs 70 in Delhi or Rs 80 in Mumbai was when the international crude price touched all time high of $ 115.

(With inputs from state bureaus)

ABOUT THE AUTHOR
Chetan Chauhan
Chetan Chauhan is the National Affairs Editor looking into all aspects of news and features from across India. A Chevening scholar with over three decades of experience in reporting and news management, Chetan has extensively covered all important aspects of the social sector, political economy, environment and climate change nationally and internationally. He did a journalism course at the Reuters Institute of Journalism in Oxford and Digital Media training at Nanyang Technological University in Singapore. He started as a reporter with The Statesman in 1996 and joined the Hindustan Times in 2000 in the metro bureau covering environment, crime and Delhi politics. He covered hot local news, from the Jessica Lal murder case to the rebellion of Delhi Congress MLAs against then Chief Minister Sheila Dikshit, to the replacement of toxic vehicle fuel with cleaner compressed natural gas (CNG) in the national capital. Some of his stories on air pollution became part of the Supreme Court’s landmark MC Mehta versus Government of India case in the National Capital Region (NCR), forcing the government to take corrective measures. As part of the national political bureau since 2004, he covered important central sectors such as environment, education, social justice, labour, rural development, water resources, renewable energy, agriculture, broadcasting and the Planning Commission for more than a decade producing several exclusive and investigative breaking stories. His specialisation is the environment, having covered at least a dozen United Nations global conferences on climate change, biodiversity and wildlife including climate summits in Paris, Copenhagen and Bali. He also covered India’s two five-year plans ---11th and 12th and reported on drafting and execution of right based laws such as Right to Education, Right to Information and rural job guarantee law, MG-NREGA, now being introduced in new format as VG-RAM-G Act. He has in-depth knowledge of social sector issues. He was one of the first to report on tigers vanishing from Sariska and Panna wildlife reserves in 2004 and 2008, respectively, leading to the setting up of the National Tiger Conservation Authority (NTCA) and the introduction of stringent penal provisions for poaching. He has written extensively on the rising human-animal conflict in India and the degradation of India’s biodiversity hotspots because of mining and other activities. Since 2004, Chetan has covered Parliament comprehensively and participated in training on the nuanced coverage of Parliament proceedings. He has travelled extensively across India to cover national and provincial elections since 1998, especially in the Hindi heartland states, considered India’s road to power. He writes a regular column for Hindustan Times, Ecostani, on important national politics, economy, Himalayan ecology and environmental issues. His other responsibilities include providing inputs for edits and edit page articles for the publication, apart from managing news flow from across India.Read More

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