Oil firms urge Govt to bring petro products under GST net

Even as the Centre and states try to reconcile their differences over the proposed modalities for rolling out the Goods and Services Tax.

Even as the Centre and states try to reconcile their differences over the proposed modalities for rolling out the Goods and Services Tax (GST),oil companies led by industry body CII today met a key government official to discuss the inclusion of the petroleum products under the ambit of the proposed indirect tax regime.

Oil companies including Shell,BP,Essar,ONGC,Nagarjuna Oil and Germany-based Schlumberger,met Finance Secretary Ashok Chawla and made a case for bringing in all petroleum products like petrol,diesel and natural gas,under the GST so that they can avail of input tax credit on the same,source told The Indian Express. However,the source said that in case these products are kept out of the scope of GST,as is the stand of the Empowered Committee (EC) of state Finance Minister’s on GST now,the oil companies would incur huge losses.

If these items are not included under GST,oil companies will lose as much as Rs 30,000 crore annually, the source added. Currently,as per the EC first discussion paper,crude,motor spirit including ATF,HSD and natural gas would be kept outside GST. This was done to protect the high tax revenue generated by these products to the state governments. The current tax rates on these products are very high,in some cases as high as 30 per cent.

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While the GST rates are expected to be moderate,the oil companies would also benefit on account of input tax credit mechanism. However,states are not very keen to keep these items within the GST purview as state taxes on petroleum products comprises as much as 30 per cent of total state revenue. There are very few states in India including Mumbai,Gujarat,Andhra Pradesh,Bihar,which have oil refineries. GST being a destination-based tax,all oil producing (or origin states) would stand to lose massively.

Though it would be a difficult task for the Centre to actually put pressure on states to include these items,the sources said that if the Centre promises to put in place a mechanism where states losing on account of petro products being under GST would be sufficiently compensated,the states may come on board.

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