Jet fuel inclusion in GST at least a year away; relief on auto cess unlikely

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The government has indicated that the next wave of goods and services tax (GST) reforms, including adding jet fuel and other petroleum products, will not be taken up for at least a year.

The newly introduced framework needs to stabilise before further changes are considered, Shashank Priya, special secretary and member of the Central Board of Indirect Taxes and Customs (CBIC), said on September 23. He was speaking at the National Conclave on GST 2.0 organised by Assocham.

“The further discussion on reforms of inclusion of ATF (aviation turbine fuel), etc., will not happen before a year, till the dust settles down on GST 2.0 reforms,” Priya said, pushing the timeline for broader reforms to the medium term with immediate focus on automation, refunds, and simplified compliance.

No relief for auto dealers

Under GST 1.0, a compensation cess ranging from 17 to 22 percent was levied on cars, increasing the effective tax incidence on vehicles to between 45 and 50 percent.

Car dealers who purchased vehicles from manufacturers at the pre-reform GST rate of 28 percent plus cess before September 22 will not be able to claim credit for the cess already paid.

Industry estimates put the blocked credit amount at about Rs 2,500 crore. Dealers have sought a mechanism for the refund of this amount.

“We are aware of the issues, but as far as cess is concerned, the government at this stage has no plan to address it by refund or giving credit. I hope the industry will adjust to this. We do not have an immediate quick fix for it,” Priya said in response to concerns raised by industry representatives.

The remarks highlight the government’s cautious approach at a time when the automobile sector continues to seek cess relief.

Focus on automation and compliance ease

The tax department is preparing to roll out automation-driven measures to ease refunds and compliance.

Refunds are set for automation, and starting November 1, a new scheme will offer automatic registration within three working days for small taxpayers with Input Tax Credit (ITC) claims not exceeding Rs 2.5 lakh

Ninety percent of refunds to exporters will also be processed on a priority basis.

Letter to CBIC field formations

The CBIC has instructed field formations to monitor the prices of specific products to ensure they reflect reductions following GST 2.0 implementation. He added that the anti-profiteering provision has not yet been activated.

Priya said CBIC is now categorising low-risk businesses to streamline oversight and has sent letters to industry associations and field formations to identify areas where return filing can be simplified.

“I am sure that the return process can be automated to make it simpler. We need to ensure this,” he said.

The new GST regime came into effect September 22, simplifying the indirect tax system into two slabs of 5 percent and 18 percent.

While the reform has been hailed as one of the most significant tax overhauls in recent decades, industry players have flagged challenges in classification, input tax credit structures, and continuing cess burden.

The GST Compensation Cess, originally designed to make up for states’ revenue shortfall for five years, has outlived its initial purpose and remains in place. Its collections are now earmarked for servicing loans raised during the pandemic, leaving sectors such as automobiles to grapple with unutilisable cess credit and higher costs.