Jaitley urges CM's to reduce burden of VAT on petroleum products used for manufacturing

Union Minister Arun Jaitley in a letter to the State Chief Ministers, Finance Ministers written earlier today highlighted the concerns raised by the manufacturing sector in the country regarding the rise in input costs of petroleum products.

In the wake of the Goods and Services Tax (GST), the union minister requested states to reduce the burden of Value Added Tax (VAT) on Petroleum Products, which are used to produce an output of products manufactured, after the introduction of Goods and Services Tax (GST).

The letter highlighted concerns raised by the manufacturing sector in the country regarding the rise in input costs of petroleum products.

However, in the pre-GST regime, the petroleum products as well as the final goods produced both attracted VAT, input tax credit of petroleum products used as inputs by manufacturers was allowed to varying extent by different States.

According to press release by Finance Ministry, Before the implementation of GST from July 1 certain states had lower rate of five percent VAT on Compressed Natural Gas used for manufacturing of goods. Some States also had lower rate of VAT on diesel being used for manufacturing sector.

Meanwhile, Jaitley had requested states to explore the possibility of having a lower rate of VAT on petroleum products used for manufacturing of those items on which there is GST, so that there is minimum disruption in the costing of goods.