As the matter has been raised by the top leadership, members of parliament (MPs) and the industry, a proposal to levy GST on petroleum products and its revenue implications for the Centre and states would be worked out and placed before the GST Council soon, which will take a final call on this matter, they said requesting anonymity.At least two petroleum products – natural gas and aviation turbine fuel (ATF) – could be brought under the Goods and Services Tax (GST) net to promote a gas-based economy and to provide a stimulus to the pandemic-hit aviation sector after the GST Council’s approval, two people aware of development said on Friday.
As the matter has been raised by the top leadership, members of parliament (MPs) and the industry, a proposal to levy GST on petroleum products and its revenue implications for the Centre and states would be worked out and placed before the GST Council soon, which will take a final call on this matter, they said requesting anonymity. Five petroleum products – crude oil, natural gas, ATF, petrol and diesel are outside the GST structure.
While laying the foundation stone for oil and gas projects in Tamil Nadu on February 17, 2021, Prime Minister Narendra Modi said the government is “committed to bringing natural gas under the GST regime” as uniformity of tax would lead to a reduction of cost of natural gas and increase its usage across industries. There is no central excise on natural gas in its gaseous form, but compressed natural gas attracts 11% duty. Value-added tax (VAT) on natural gas, however, varies from state to state in the range of 6% to 24.5%.
“After several MPs raised the issue of bringing petroleum products under GST, the finance minister assured them that the matter would be placed before the GST Council,” the first person said.
Finance minister Nirmala Sitharaman said in the Lok Sabha on March 23 this year: “A point has been raised about bringing diesel and petrol under GST. I will be glad to have it on the agenda in the next GST Council.” The council is expected to meet soon, but no date has been finalised as yet.
“It is unlikely that states will agree to bring petrol and diesel under GST in the near future due to massive revenue implications. But, a start could be made with natural gas and ATF, where revenue implications are not that significant,” the second person said.
Central and state taxes on petroleum products contributed over ₹5.55 lakh crore in 2019-20, and diesel and petrol are the two biggest revenue earners in that order.
The Union finance ministry did not respond to an email query on this matter. The GST Council is chaired by the Union finance minister and has finance ministers of states as its members. The council’s decisions are often unanimous.
In a memorandum to the government to provide relief to pandemic-hit sectors, the Confederation of Indian Industry (CII) proposed to bring ATF under the ambit of GST. “Bringing ATF under GST would provide long-term relief to the airlines… Inclusion under GST should enable full input tax credit on all goods and services,” it said. While central excise on ATF is 11%, VAT rates on the jet fuel vary between zero to 30% depending on states. Chartered aircraft are charged about 18% tax on full invoice value.
MS Mani, senior director at consultancy firm Deloitte India, said both natural gas and ATF can be brought under the ambit of GST without much impact on the central or state exchequers. “Natural gas impacts only certain states, while ATF would impact more states and the states where these are supplied would undergo revenue losses. However their quantum may be much lower compared to petrol and diesel,” he said.
According to Mani, their inclusion is inevitable. “This is a natural progression in the scheme of things as envisaged when GST was introduced and would benefit businesses in various states who use petroleum products as an input, where they are unable to get input tax credits at present. Inclusion of natural gas and ATF in the purview of GST would pave the way for the eventual introduction of petrol and diesel under GST,” he added.
Source: https://www.hindustantimes.com/india-news/natural-gas-jet-fuel-may-come-under-gst-101617992835880.html
© 2018 CA Chandan Agarwal. All rights reserved.