With different taxes rates leading to fuel prices varing from state to state, the Oil industry has demanded inclusion of crude oil and its products, and natural gas in the reformist GST regime.
Petrofed, a body representing both public and private sector companies like Indian Oil Corp and Reliance Industries, has written to the government seeking inclusion of crude oil, petrol, diesel, aviation turbine fuel (ATF) and natural gas in the Goods and Services Tax (GST) that is likely to come into effect from next year.
Finance Ministry's draft proposal for GST regime proposes to keep crude oil, petrol, diesel, ATF and natural gas permanently outside GST through a Constitutional Amendment.
This has been done to protect finances of states, who rely heavily on collections from levies on oil products to make up for their budgetary targets.
"We have consistently been requesting for inclusion of petroleum in the GST with full pass-thru for the healthy growth
of the industry," Petrofed Director General A K Arora wrote to the Petroleum Secretary S Sundareshan on November 30.
The partial implementation of GST for some petroleum products will push up costs for the sector, as the states would be levying service tax under the new regime and input credits cannot be availed of by the sector for the excluded basket.
"On the other hand, the inclusion of petroleum products under GST will eliminate stranding of taxes paid by suppliers as well as by the industry at different stages in the petroleum value chain, besides enabling the states and the Centre to capture full revenue potential up to sale to final consumers," Petrofed wrote.
Countries like Australia, Canada, Sri Lanka, Singapore and Brazil have included petroleum products in GST by customizing GST to meet local requirements through special provisions, such as restrictions on input tax credit on non-rebatable specific additional levies.
Petrofed said the 13th Finance Commission has recommended that petrol, diesel, ATF, crude oil and natural gas should form part of GST legislation.
"It has also recommended that the revenue concerns of the states and the centre can be addressed by levying, if necessary, an additional tax (excise tax) on these commodities in addition to GST, while bringing them within the ambit of GST," it said.
Petrofed said the exclusion of petrol, diesel, ATF, crude and natural gas from GST through a constitutional amendment was not desirable, since any changes in future to bring the above products under GST will need the Constitution to be amended again.
