The Centre and the states must bring petroleum merchandise into the goods and companies tax (GST) framework sooner reasonably Refinery than later. Oil merchandise garner hugely disproportionate indirect tax revenues, but we need to widen the tax regime, modernise it and rev up efficiency by eschewing tax-on-tax and cascading charges alongside the value chain. There’s a stable case for the Centre to include all petro-products in the GST regime, levy a high-up cess to account for externalities like pollution, and to proactively share the proceeds with the states.
Reviews say that with the GST rollout, oil producers, refiners and entrepreneurs may take successful of as much as Rs 25,000 crore per annum. True, the GST Council, the body of Union and state finance ministers, is to resolve the date for bringing petroleum merchandise underneath GST.
However as of now, petroleum crude, pure fuel, diesel and petrol are all out of the GST framework. So, input taxes paid on the output of crude oil, fuel and automotive gas would not be creditable, thus jacking up the 4500 square 2205 heat exchanger tax burden. Thankfully, oil merchandise equivalent to cooking fuel, kerosene and naphtha are included within the GST regime, so some taxes can be set-off against taxes already paid. But it surely would be a messy state of affairs that’s wholly avoidable.
Oil firms would need to adjust to both the outdated and new tax regimes, and in any case, tax credit won’t be transferable between the 2 techniques.
As an alternative of muddling together with a suboptimal tax regime, we need to promptly carry all petroleum merchandise into the GST framework. India’s large and fast-growing transportation, logistics and distribution sector needs to be made tax-efficient with GST on fuels. It would be very much as per world practice and boost India’s competitive advantage proper across the board. It is sensible to do that quick.
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