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.
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 ₹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 ₹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.
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 ₹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.
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.
Gas sales, including CNG and piped gas supplies attract VAT ranging from 5-12 per cent.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.