Petrol, diesel to be under GST soon, says Dharmendra 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, Union Minister Dharmendra Pradhan said on Thursday.

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

“Refinery, pipeline, exploration… all are under GST. 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 said.

“The current taxes on petrol and diesel are like a cash cow. Nobody wants to lose this revenue. But it is not far away. It has to come to GST. States have their apprehensions. 

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 inclusion of petrol diesel in GST), let’s see,” he said. 

On a query from Business Standard on whether 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; 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 one rupee aggregately. 

Asked about the options before the government to bring down the prices 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 government’s control,” he said.

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

On the initiative from states to reduce VAT, he said, “the one person who could take a lead was Goa chief minister Manohar Parrikar.”

Referring to a recent conversation with Parrikar, he said the latter had offered to bring down VAT on petrol and diesel to 14 per cent in Goa where the current rate is lowest among all the states at 17 per cent.“

He is the one who could move the proposal on petrol and diesel in the GST Council,” Pradhan said.