HYDERABAD: Telangana, along with several other States, has been opposing the Centre’s plans to include petroleum products in the Goods and Services Tax (GST) regime. The State government has already opposed this in the previous meetings of the GST Council and there is no change in the State’s stand.
Several States including AP, Telangana and even the BJP-ruled States raised alarm immediately after the Minister of Petroleum and Natural Gas and Steel Dharmendra Pradhan called for the inclusion of petroleum products under GST regime. The Union Minister speaking at third India Energy Forum meeting in Delhi on Monday appealed to the Union Finance Minister to take this up in the GST Council and at least make a beginning by including natural gas and aviation turbine fuel (ATF) in the GST.
Dharmendra Pradhan said that it had been two years since the introduction of historic tax reform the GST was implemented. Given the complexity of the petroleum sector and the revenue dependence of State governments in this sector, petroleum products have been kept outside the ambit of the GST regime. There has been continuous demand from the petroleum industry for the inclusion of petroleum products under the GST regime, he said. However, experts felt that the inclusion of petroleum products in the GST needs a lot of thought. “Now, the Centre is unable to pay GST compensation to the States. How could it pay the compensation after the inclusion of the petroleum products,” experts wondered.
There were only two revenue sources with the States now -- petroleum products and the alcohol. Already the Centre brought 50 per cent of the alcohol under GST, in the name of industrial use. No State including the BJP-ruled states would accept the proposal to bring petroleum products under GST, sources said.
However, the sources in the government were unable to tell the exact financial loss to the State government, if natural gas and ATF were brought under GST immediately. “It depends on what formula, the Centre will adopt,” sources said.
Pradhan had been making similar demand for the last two years, the sources pointed and said that it was not so easy to bring petroleum products under the GST.
“If the petroleum products are included in the GST, the economy of the States and even the Central government will collapse,” sources said. Due to the complexity, the Centre should not venture to bring petroleum products under the GST, the experts suggested.
When contacted, Special Chief Secretary Revenue Somesh Kumar said that petroleum products and alcohol should not be brought under the GST, as the States would be left with no revenue sources.