New Goods and Services Tax does not cover alcohol, petroleum products and electricity

Petroleum products, alcohol and power are out of GST net


Centre and States reach consensus on tax treatment of such products in the new regime.


The Centre and the States have agreed to leave out alcohol, petroleum products and electricity duty out of the proposed Goods and Services Tax (GST) system.


“Regarding taxation on alcohol, petroleum products such as petrol and diesel, and also electricity duty, there is now convergence between the Centre and the States that these will remain outside the GST to begin with,” Dr Asim Dasgupta, Chairman of the Empowered Committee of State Finance Ministers, said.


States had suggested that sales tax/VAT can continue to be levied, as is the current practice. Also, excise duty, which is being levied by the States, may not also be affected. However, the Department of Revenue did not agree to the suggestion to keep alcoholic beverages out of the GST net. The Union Finance Ministry had, in response to the discussion paper, taken the stance that alcoholic beverages should be brought under the purview of the GST in order to remove the cascading effect of GST paid on inputs such as raw material and packaging material. The Department had also said that sales tax/VAT and State excise duty can be charged over and above GST. As for the petroleum products, the Empowered Committee had suggested that the basket of petroleum products, that is, crude, motor spirit (including ATF) and diesel, should be kept outside the GST.

It had said that sales tax could continue to be levied by the States on these products with the prevailing floor rate. However, the Union Finance Ministry was of the view that petroleum products may be brought under the GST. It contended that keeping crude petroleum and natural gas out of the GST net would imply that the credit on capital goods and input services going into exploration and extraction would not be available, resulting in cascading. Leaving diesel, ATF and motor spirit out of the purview of GST would make it extremely difficult for refineries to apportion the credit on capital goods, input services and inputs, the Revenue Department had said.

Dr Asim Dasgupta


K. R. Srivats…..New Delhi, July 22….from the pages of HINDU BUSINESS LINE newspaper