Speaking in the Rajya Sabha on Tuesday Finance Minister Arun Jaitley said the government wants to bring petroleum and petroleum products under the ambit of GST and is awaiting the states’ response on the same.
“Government is in favour of bringing petroleum products under GST. We would like to await consensus of the states and hope states at some stage soner or later agree to the consensus,” said Jaitley.
At present, different petroleum products are taxed differently across states. Given the huge variance in the value-added tax (VAT) on petroleum products across the states, the petroleum ministry has been advocating for uniformity in taxes.
A case in point being diesel. While the VAT applicable on diesel in Delhi is 16.75%, it is 28.51% in Mumbai.
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Experts believe the finance ministry’s plan, if put in practice, will help bring in uniformity in prices.
“Tax burden on the products will be quantified. Since they are not a part of GST, the adjoining extra cost will help quantify the burden. Prices of these products shall also reach a probable uniformity,” said Bipin Sapra, partner-indirect tax at consultancy firm EY.
“Instead of zero ratings, any finite number will have a massive impact on compliances and also call to question some of the existing arrangements in terms of implementation. Idea is to have a rate that won’t affect the existing GST chain” added Anish De, partner-infrastructure government and healthcare, KPMG India.
According to the Petroleum Planning Analysis Cell (PPAC), which works under the ministry of petroleum and natural gas, total state-wise collection of sales tax on petroleum, oil and lubricant products for 2015-16 amounted to around Rs.1.43 trillion. The total contribution of the petroleum sector to the central exchequer, in 2015-16, was around Rs.2 trillion, including the cess on crude oil, excise duty and custom duty, among others.
This comes at a time when the National Democratic Alliance government wants to improve the energy access for its citizens. India imported 202.85 million tonne (MT) of crude oil in 2015-16 for Rs.4.16 trillion, according to PPAC. For 2014-15, India imported 189 MT of crude oil at a cost of Rs.6.87 trillion.
According to BP Global data, India has emerged as the third largest consumer of crude oil with a consumption of 4.2 million barrels per day (mbpd) for calendar year 2015, after the US (19.39 mbpd) and China (11.96 mbpd). India overtook Japan which consumed 4.15 mbpd.