NEW DELHI: Finance Minister Arun Jaitley has urged state chief ministers to scale back gross sales tax or worth-added tax (VAT) on fuels which have been kept out of the purview of products and companies tax (GST) however are used as input for products that come underneath the brand new indirect tax regime.
Crude oil, petrol, diesel, natural fuel and aviation turbine gas (ATF) have been stored out of the purview of GST, which kicked in from July, changing over a dozen central and state levies like central excise, service tax and VAT with a single uniform levy. States have turned down the Centre’s request to deliver natural gas inside the ambit of GST.
A proposal to this effect was a part of the GST Council’s agenda for its final meeting.
“The letter by finance minister highlights a priority being raised by the manufacturing sector within the country relating to the rise in input prices of petroleum products happening on account of transition to the GST regime,” an official statement said on Friday.
Inputs akin to pure fuel are used for power generation in addition to in manufacturing fertilisers, petrochemicals and a wide range of merchandise including glass.
Crude oil is used to make petrol and diesel as additionally kerosene, LPG and industrial fuels including naptha, gas oil and bitumen.
While different industries can declare enter tax credit or set off tax paid on inputs with that paid on the ultimate product, these industries cannot do so as crude oil, three petroleum merchandise and natural gas are out of Vacuum/Atmospheric Distillation Unit GST’s ambit. This raises price for the industries utilizing either of the 5 merchandise as inputs.
Jaitley has written to state chief ministers “urging them to cut back burden of VAT on petroleum merchandise used as inputs in making of goods after the introduction of GST”, according to the assertion.
“Within the pre-GST regime, because petroleum merchandise in addition to the ultimate goods produced each attracted VAT, input tax credit score of petroleum merchandise getting used as inputs by manufacturers was allowed to varying extent by totally different states.
“However, in the submit-GST scenario, manufactured items appeal to GST while the inputs of petroleum products used within the manufacturing attract VAT and, subsequently, it might result in cascading of taxes,” it stated.
Some states had lowered VAT to 5% on compressed natural fuel (CNG) used for manufacturing of goods. Some others had minimize VAT on diesel.
VAT on diesel ranges from 17.4% in Delhi to 31.06% in Andhra Pradesh. On natural fuel, it varies from nil to 15%.
Pure gasoline alternate options comparable to naphtha, gasoline oil and LPG are already included within the GST listing. Whereas LPG will likely be taxed at 5%, naphtha and gasoline oil will be taxed at 18%.