GST Council may bring natural gas, aviation turbine fuel under its purview at next meeting

GST Council may bring natural gas, aviation turbine fuel under its purview at next meeting

GST Council is likely to bring in two petroleum products – natural gas and aviation turbine fuel (ATF) – under the ambit of the new indirect tax system at its next meeting, a senior government official told Moneycontrol. GST Council: natural-gasThe date of the Council meeting is yet to be decided but it is expected to happen later this month, the official said.

The rate at which these two products will be taxed is yet to be decided, the official said, adding that ATF may attract 12 percent tax.

“Discussion regarding inclusion of natural gas and ATF has already begun. If there is consensus, the GST Council, may introduce these products under GST,” the official said.

Currently, five petroleum products – petrol, diesel, crude oil, natural gas and ATF – are excluded from GST. These five items will continue to be taxed in accordance with the pre-GST tax regime, till the highest decision-making panel in the new taxation system, the GST Council, chooses to include it.

Under the existing structure, the fuels attract the Centre’s excise duty and a state’s value added tax. Both these and all other levies will get subsumed under GST if they were brought under its ambit.

The decision on their inclusion depends on the financial position of the states as revenues from these five petroleum products constitute a substantial chunk of state government finances.

States are incurring losses as GST, introduced from July 1, 2017, subsumed a dozen of taxes, introducing single levy, in a bid to simplify taxation system and remove the cascading effect of ‘tax on tax’ in the country.

Also Read: Petrol Should be Brought Under GST, Reiterates Dharmendra Pradhan

The Council had decided that states would receive provisional compensation from Centre for loss of revenue due to abolition of taxes such as VAT, octroi after the implementation of new tax system. The compensation would be met through levy of a ‘GST Compensation Cess’ on luxury items and sin goods like tobacco, for the first five years.

During July-March, 2017-18, the Centre paid Rs 47,844 crore as compensation cess to the states.

According to the industry, the exclusion of ATF and natural gas from GST is increasing the cost of these products as tax on inputs is not being credited against sale of these products, which ultimately, adds to the cost of production.

For instance, last month, the aviation ministry sought inclusion of the ATF under the GST umbrella as soaring global crude oil prices raised prices of jet fuels, among the biggest costs for an airline. Rise in international crude oil price has increased ATF cost by nearly 40 percent during the first five months of the calendar year. A higher jet fuel cost makes air tickets more expensive, ultimately affecting the customers.

Similarly, natural gas, natural gas is widely used as industrial input by a variety of industries such as steel, fertilizer, chemicals, and cement, among others. The industry has been complaining that unavailability of tax credit is against the basic objective of GST, which is to eliminate cascading impact of taxes.

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Source: Moneycontrol

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