GST exclusion costs oil industry Rs 200 bn input credit annually: Pradhan

With petrol and diesel kept out of the purview of GST, the state owned oil industry is losing Rs 200 billion annually in terms of input credit, says Union Minister Dharmendra Pradhan.

However, he said, with the GST regime stabilising and apprehensions over GST collection gradually receding, “it is a matter of time petrol and diesel are brought under GST”.

“All the expenditure of the oil industry- refinery, pipeline, exploration, are paying GST (for various transactions). I am not getting back that money, the input credit. So I am making it costly. I am losing Rs 200 billion per annum, only by government companies, in input credit. So it is just a matter of time (before petrol and diesel are brought under GST)”, he added.

“The current taxes on petrol and diesel are like a cash cow. Nobody wants to lose this revenue avenue. But it is not far away. It has to come to GST. The states have their apprehension. They were right also because they did not know what would be the return on GST. They do not want to easily lose the perk”, Pradhan said.

After ten months of GST, he said, there is a change in thinking among the states. “I am talking to the chief ministers, finance ministers, they are gradually coming to the point that it’s ok now, the time has come to make a start (on the inclusion of petrol diesel in GST), let’s see”, he said.

On a query from Business Standard whether the oil prices will be reduced before the next phase of elections, Pradhan hinted that the government is on the job. “We will not push common man too far away, we are carrying out that endeavour. I appreciate your question but I am not in the business of making news”.

He, however, said the oil prices are on the decline over last few days during which it has come down by Rs one aggregately.  

Asked what are the options before the government to bring it down further, Pradhan said, the government is looking into various factors involved in oil prices- the taxes of the Centre and states, the management of exchange rate, global geopolitical triggers (like Trump’s call for duty on European steel) etc. “Of these, only the first one is in the control of the government”, he pointed out.

The Centre, of course, cannot force the states to reduce their VAT. Each state, irrespective of the party in power, has its own compulsion, he said.  

On the initiative from states to reduce VAT, he said, “the one person who could take a lead, was the Goa chief minister, Manohar Parrikar”. Referring to a recent conversation with Parrikar from his sick bed, he said, the latter had offered to bring down VAT on petrol and diesel to 14 per cent in Goa where the current VAT rate is lowest among the states at 17 per cent. “He is the one person who could move the proposal on petrol and diesel in the GST council”, Pradhan said.