The BJP government in Gujarat today made it clear that it will not bring petrol and diesel under the ambit of the Goods and Services Tax (GST) as doing so would make a significant dent in the state revenue.
Speaking during a discussion of Budgetary demands of his department in the Legislative Assembly, Finance Minister Nitin Patel also indicated that the Value Added Tax (VAT) on fuel is not likely to be reduced.
Gujarat will lose half of its tax collection to the Centre if petrol and diesel were brought under the GST, he said.
The Deputy Chief Minister was replying to Congress legislators' demand that fuel items be brought under the GST.
The 50-50 revenue sharing formula of the GST is like running a loss-making business, the finance minister said.
"Opposition members need to understand the GST before making such a demand. If we put fuel under the GST, we have to give away 50 per cent tax revenue to the Centre. Under the VAT, we are getting the entire chunk of tax on fuel," he said.
"That is why all the states have decided not to put fuel items under the GST, and finance ministers of all the states agreed on this during the GST Council meetings. VAT on fuel is the main source of income for us, and there is no benefit for the state in putting fuel under the GST," he said.
"The best way (to give relief to people) is that the Centre reduces the central excise on fuel. We can think of adopting the GST for fuel only if the Council charts out a formula to make sure that the states do not suffer a loss. Otherwise there is no point in doing a loss-making business," he added.
Congress MLA Amit Chavda then asked whether the government was planning to reduce the VAT on fuel.
Gujarat levies 20 per cent VAT and four per cent cess on both petrol and diesel.
The finance minister indicated that this can not be expected. "The tax on petrol and diesel in Gujarat is much lower than in many other states. It is perhaps the lowest in the country," Patel said.
To a demand of farm loan waiver by C J Chavda, another Congress MLA, the Deputy CM said it is a misconception that farmers in Gujarat are heavily indebted.
Chavda had claimed that the total farm debt in Gujarat is Rs 32,000 crore.
"Farmers in Gujarat take loans of Rs 20,000 crore every year. Around 95 per cent of them repay the loans in time. It shows that farmers are not reeling under debt. Instead of just waiving loans, which is not an effective mechanism, our government is trying to increase their income," Patel said.
To a question by senior Congress MLA Shailesh Parmar, the finance minister said the per capita income in Gujarat is Rs 1.56 lakh, while the total debt of the state stands at Rs 1,99,338 crore.
The debt is gradually coming down as most of the important infrastructures works, such as Sardar Sarovar Dam, have been finished under the BJP government, he said.
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