Pradhan must push for petroleum items in GST

Vol 20, PW 1 (22 Sep 16) People & Policy

For the sake of the Indian oil and gas sector a high-powered council headed by finance minister Arun Jaitley will hopefully decide to include five major petroleum and petro-product items in the Goods & Services Tax (GST) bill.

So far crude oil, natural gas, petrol, high speed diesel and Aviation Turbine Fuel have not been included in the proposed uniform tax regime, as various state governments want to maintain their grip on revenues from these high value products. But the council, set up on September 12 by the cabinet, will have time until the GST bill is launched on April 1, 2017 to convince the states that present variations in tax rates are leading to chaos.

Oil minister Dharmendra Pradhan will have a critical role to play, according to a senior BJP source. "Pradhan knows that most states have increased taxes on petroleum products," he says.

"It's an uphill task to bring in a uniform tax rate." Consider that in Delhi just 17.42% VAT is applicable on diesel, according to data released on September 6 by the oil ministry's Petroleum Planning & Analysis Cell (PPAC). Yet in Narendra Modi's home state Gujarat VAT on diesel is as high as 28.96%.

Similarly in Andhra Pradesh the VAT on petrol is a staggering 39.37% while in Goa it is only 15%. A KPMG source fears that not including these petroleum products under GST will negatively impact the oil and gas sector and lead to 'energy inflation' or rising costs.