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Some Petroleum Products Could be Brought Under GST by New Government

In April, the GST collection had already shot up to record level of Rs 1.13 lakh crore

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GST levy on natural gas would help state-run oil companies. Pixabay

At least two out of five petroleum products, including the aviation turbine fuel or ATF and natural gas, are likely to be among the first set of petro products to be included in the GST ahead of an earlier agreed schedule.

Sources said that with Modi government again set to take charge of the government at the Centre, the prospect of two products being included into the GST fold has brightened. The Finance Ministry has started preparing ground for next round of discussions at the GST Council with proposal for taking out gas and ATF from GST first before evolving consensus on other petroleum products.

The Ministry of Petroleum and Natural Gas has already put a request for their inclusion in the indirect tax system and the Finance Ministry could consider placing the proposal in the initial meetings of the Council after the new government takes charge at the Centre.

As part of its efforts to build consensus with states on GST launch, the previous Modi government had decided to exclude five petroleum products viz crude oil, petrol, diesel, ATF and natural gas from the list items placed under GST but included products such as cooking gas, kerosene and naphtha in the new regime.

Petroleum Products, GST, New Government
The Ministry of Petroleum and Natural Gas has already put a request for their inclusion in the indirect tax system. Pixabay

This created a messy situation for companies, as they were required to comply with both the old and new tax regimes. Moreover, tax credits were not transferable between the two systems.

A member of the council had earlier said that though petroleum products were not kept out of the GST, its inclusion in the regular tax system might have to wait at least for a year by when the revenue impact of GST would be better known.

The government hopes that the GST collections would be well over Rs 1 lakh crore mark in all months of FY20 easing pressure on the revenue to bring in next wave of reforms. In April, the GST collection had already shot up to record level of Rs 1.13 lakh crore.

“ATF may be the first among petro product still outside GST. Inclusion of natural gas could be next or may be done simultaneously with ATF,” said government source privy to the development.

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The jet fuel price’s inclusion would allow airlines to take input tax credit on the GST paid thus bringing down the effective cost. Similarly, GST levy on natural gas would help state-run oil companies such as ONGC, IOCL, BPCL and HPCL to save tax burden to the tune of Rs 25,000 crore as they would get credit on taxes paid for inputs and services. Tax credits are not transferable between the two different taxation systems.

Experts said that the ATF price would come down if it is kept in the 18 per cent GST bracket and no other surcharge is levied. The lower fuel cost would mean ticket prices going down for air-travellers. It would benefit corporate travellers the most as they would be able to claim credit on GST paid besides their effective tax rate would also come down. Fuel accounts for nearly 30-40 per cent of an airline’s operating cost.

Petroleum Products, GST, New Government
The government hopes that the GST collections would be well over Rs 1 lakh crore mark. Pixabay

Inclusion of gas would not pose a challenge for the GST Council as it is largely an industrial product where a switch over to new taxation would not be difficult. The revenue implication for the states is also low in the case of this switchover.

Earlier, former Oil and Petroleum Minister Dharmendra Pradhan had also made a strong case for inclusion of natural gas in GST saying that if polluting coal can be included, then the environment-friendly fuel certainly deserves a place in the new regime. He also favoured bringing others petro products under the GST gradually.

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Gas sales, including CNG and piped gas supplies attract VAT ranging from 5-12 per cent. (IANS)

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GST Council Lowers Tax on Number of Goods and Services to Spur Demand

The hotel rooms costing between Rs 1,000 and Rs 7,500 would attract 12 per cent GST

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GST, Council, Tax
Announcing the rate cuts following the GST Council meeting here, Finance Minister Nirmala Sitharaman said that hotels room with tariff of Rs 7,500 crore would now attract 18 per cent GST from 28 per cent earlier. Pixabay

Friday proved to be a big day for India Inc. After a slew of tax concessions including reduction in corporate tax from 30 per cent to 22 per cent, the GST Council has lowered tax on a number of goods and services to spur demand.

The key sectors which would benefit from GST rate cuts are hotels, gems & jewellery, defence and automobiles.

Announcing the rate cuts following the GST Council meeting here, Finance Minister Nirmala Sitharaman said that hotels room with tariff of Rs 7,500 crore would now attract 18 per cent GST from 28 per cent earlier. The hotel rooms costing between Rs 1,000 and Rs 7,500 would attract 12 per cent GST. No tax would be levied on hotel rooms with rental upto Rs 1,000.

Among other rate changes, the Council has reduced rates for cups and plates made from leaves and hides to nil. The GST on caffeinated beverages has, however, been increased from 18 per cent to 28 per cent plus additional 12 per cent cess.

GST, Council, Tax
Friday proved to be a big day for India Inc. After a slew of tax concessions including reduction in corporate tax from 30 per cent to 22 per cent, the GST Council has lowered tax. Pixabay

The Council has exempted specified defence items from GST to promote this key sector.

Among other major items, the Council has reduced compensation cess on passenger vehicles with seating capacity of 10-13 persons by 1-3 per cent, thus making them cheaper.

Railway wagons, coaches and rolling stocks would, however, now attract higher GST of 12 per cent from 5 per cent earlier.

The revised GST rates would become effective from October 1, 2019.

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In a major boost to gems and jewellery sector, the Council recommended to reduce GST on cut and polished semi-precious items to 0.25 per cent from 3 per cent now.

The two back-to-back announcements are set to boost growth and investment.

With most engines of growth stuttering and GDP declining to six-year low of 5 per cent in the April-June quarter, pressure has been mounting on the government to revive the economy. Some external factors like US-China trade war has added to the woes.

GST, Council, Tax
The key sectors which would benefit from GST rate cuts are hotels, gems & jewellery, defence and automobiles. Pixabay

In the wake of domestic and external headwinds, the Reserve Bank of India recently lowered its GDP forecast and pegged it at 6.9 per cent in 2019-20. Several rating agencies and research firms expect the growth to be in the range of 6.5-7 per cent.

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The poor show in the first quarter of the current fiscal has prompted the Modi government to take measures to boost growth and lift business sentiment. Starting August 23, Finance Minister Sitharaman has announced four set of measures to put economy on fast track. (IANS)