GST levies a tax rate of 18 percent on biodiesel that has enjoyed zero excise duty for ten years
Union minister for road transport and highways, Nitin Gadkari today said that he would ask the Finance Minister Arun Jaitley to cut Goods and Services Tax (GST) on biofuel by more than 10 percentage points.
“I would ask the finance ministry to reduce the GST on biofuels from current 18 percent to five percent,” said Gadkari.
Biofuels enjoyed zero excise duty across the country and nil value added tax (VAT) in states such as West Bengal, Uttar Pradesh, Rajasthan and Uttrakhand for close to ten years before the new indirect tax system was ushered in on July 1.
A high GST rate makes biofuel less competitive in the market, increasing dependence on imports.
Industry bodies like Biodiesel Association of India have voiced concerns for such a sharp rise in tax rate citing that higher tax rate could disrupt a market that is in its “nascent stage”.
It has said that such a hike is “biased” and might hamper the fuel industry which is merely two years old in India.
Speaking on the occasion of World Biofuel Day, Gadkari said that biofuels can be pitched as an inexpensive and green fuel option against conventional fuels.
“Biofuels are cost effective and environment-friendly substitutes to conventional fuels,” he said.
“Besides bringing down pollution, biofuels produced indigenously from agricultural waste, plants like bamboo, non-edible oilseeds, or municipal waste will help reduce the country’s huge import bill”.
India imports approximately 80 percent of crude oil from Middle East, West Africa, Latin America and South-east Asia to meets its domestic-use and transportation requirements.
Prime Minister Narendra Modi has, however, asked to reduce the import by at least 10 percentage points to 70 percent by 2022, when the country celebrates 75 years of independence.
“A roadmap on the use of biofuels will help in achieving this (reduction in import) target,” said Dharmendra Pradhan, minister of state for petroleum and natural gas.
He said that India may soon have a policy on biofuel as the ministry of new and renewable energy along with ministry of petroleum and natural gas are working towards it.
“The policy will take into consideration various facets like role of the government, return on investment, etc,” Pradhan said.
“Biofuel policy will be a major milestone in the socio-economic development of the country,” Gadkari said.Biofuels can help creates jobs, foster economic growth, support farmers, help improve energy security along with a boost to barren wastelands of the country.