The Centre may accommodate States’ revised stand to bring crude oil, petroleum products and alcohol for human consumption within the ambit of Goods and Service Tax (GST).
A senior Finance Ministry official told Business Line , “Such a move will require official amendment in the Constitution (115th Amendment) Bill 2011. There should not be any problem in this”. This Bill was introduced in the Lok Sabha in March last year.
Currently, the Bill is being vetted by the Standing Committee on Finance. It is expected to give its report by the Monsoon Session of Parliament, which is scheduled to start from August 8.
“The Finance Ministry can propose official amendments only after the Standing Committee submits its report. Further, these will need Cabinet approval. Only then the revised Bill will be brought for consideration and passage in Parliament,” the official explained.
Earlier, the Centre proposed to bring petroleum products and alcohol for human consumption under GST, but States were not ready.
This was why the Bill said that the coverage of GST will include all the goods and services other than crude petroleum, diesel, petrol, aviation turbine fuel, natural gas and alcohol for human consumption.
However, States have now changed their mind. This was evident in the presentation by the Chairman of the Empowered Committee of States Finance Ministers, Mr Sushil Modi, before the Standing Committee on June 15.
Mr Modi proposed that States be allowed to impose additional non-creditable levies over and above GST on petrol, diesel and liquor after these products are brought within GST.
States’ argument was that bringing these products within GST will allow corporates to take input tax credit. While this will help the industry, States may lose revenue. This was reason why they have asked for additional taxation to compensate the shortfall in the revenue.
But, the additional taxation will not be input tax credit compatible. Petroleum products and liquor contribute on an average 40 per cent in the total revenue of the States.