 "With GST, petro tax collection of over Rs one trillion by states at stake")
With petroleum and petroleum products constitutionally brought under the purview of goods and services tax (GST), concern of some of the states, particularly those with high collections from sales tax on petrol and related products, is not without reason.
According to Indian Natural Gas Statistics, 2013-14, published by government of India in October 2014, in 2013-14, the total sales tax payments by states on account of petroleum products was Rs 1,17,661 crore (provisional estimates), against Rs 1,04,120 crore in 2012-13. States for which a significant chunk of revenue collections are at stake include Maharashtra, Tamil Nadu and Andhra Pradesh-- the top three states in terms of highest sales tax payments on petroleum products.
Roughly, tax on petroleum products account for nearly 20 per cent of their overall sales tax collections. Recently, West Bengal finance minister Amit Mitra said the state would lose Rs 4,000 crore on account of central sales tax (CST) only, if the draft Constitutional Amendment Bill on GST is approved in Parliament. West Bengal charges around 25 per cent sales tax on petrol, which is one of the highest among all states. A majority of states charge 20 per cent sales tax on petrol. Data from Indian Natural Gas Statistics shows, in 2013-14 (provisional estimates) show sales tax payments from petroleum products for West Bengal was Rs 5,484 crore, which is roughly 23 per cent of states total sales tax collection.
| Sales Tax Payments on petroleum products | |
| State | Sales Tax Payments on Petroleum Products (provisional) Rs crore, 2103-14 |
| Maharashtra | 17,165 |
| Tamil Nadu | 12,213 |
| Andhra Pradesh | 12,014 |
| Uttar Pradesh | 11,742 |
| Karnataka | 9,009 |
| Gujarat | 7,006 |
| Rajasthan | 5,522 |
| West Bengal | 5,484 |
| Kerala | 5,162 |
| Madhya Pradesh | 5,129 |
| Source: Indian Natural Gas Statistics, 2013-14, government of India, October 2014 | |
Apart from West Bengal, states which might have to worry about dwindling revenue on account of inclusion of petroleum in GST include in Maharashtra, where petroleum products sales tax payments in 2013-14 was pegged at Rs 17,165 crore, followed by Tamil Nadu, where sales tax payments on petroleum products was pegged at Rs 12,213 crore. In Andhra Pradesh, sales tax collection from petroleum products was Rs 12,014 crore. At present, sales tax on petrol is highest in Assam at 31 per cent.
"The impact of inclusion of petroleum products in GST is yet to assessed. At present various states have serious apprehensions towards losing of revenue if it is covered under GST since more than 1/3rd of the state revenues (Sales Tax) comes from petroleum products. However, in due course, it has to come under GST net otherwise the basic purpose of GST will be lost to a great extent. Many companies use petroleum products as inputs and they will lose input tax credit if it does not come under GST," according to T B Chatterjee, senior executive vice president and company secretary, DIC India.
Alhough under its ambit, the petroleum products would not be under the purview of GST, till the GST Council notifies. The Constitutional Amendment Bill cleared by the Cabinet on Wednesday excludes only one liquor from the purview of GST.
"While it is expected that the states would be compensated if initially petroleum products are included in GST, in the long term, the states might see a lower collections from petroleum products. At present in some states like West Bengal, the tax rates on petroleum products are quite high," according to a government official.