New Delhi: The Goods and Services Tax (GST) Council, will not take up proposals to include natural gas and jet fuel within the ambit of the new indirect tax at its next meeting on Saturday, as most states have failed to meet revenue collection targets, a person aware of the development said.
The oil ministry and the civil aviation ministry are keen to have natural gas and jet fuel included in GST.
These demands will be considered when the time is appropriate, the person said, requesting anonymity.
Instead, the council will consider slashing tax rates on a few items including forest produce used by the poor such as plates made of leaves, sanitary napkins and handicraft items.
The council has also turned down demands for a rate cut from paint and cement industries, among others, in view of possible revenue loss to the exchequer, the person said.
“Revenue consideration is vital in decisions regarding tax rates as only a few North Eastern states have managed to meet the projected 14% revenue growth in the GST regime. Some states like Maharashtra and Tamil Nadu have managed to reach close to their targeted revenue as they have a large services industry," said the person cited above.
Under GST, states have the right to tax services, which was previously an exclusive prerogative of the central government.
With less-than-expected revenue collection, states are keen to keep fuel products out of GST as revenue from petroleum collected in the form of sales tax or value added tax account for more than 30% of state revenues, according to industry estimates.
States such as Kerala have said they will resist any move that will limit their taxation powers in the wake of increased tax evasion after border check posts have been removed.
“Increasing the tax base and plugging tax leakage is the way forward in increasing revenue," said Pratik Jain, partner and leader of indirect tax at PwC.
The Union finance ministry is keen to protect revenue as the National Democratic Alliance administration is rolling out welfare schemes such as health insurance for the poor and higher support price for farmers.
“While better compliance could improve GST revenue receipts slightly, higher economic growth could facilitate a major jump ," said R. Muralidharan, senior director, Deloitte India.
The council will also consider amendments to GST laws.