Amid skyrocketing fuel prices, state governments have expressed their willingness to bring fuel under the Goods and Services Tax (GST) regime. The states have, however, sought a concrete proposal, which includes a provision for compensation, from the Centre. At present, every state has its own way of taxing fuels, while the Centre also collects its own duties and cess.
West Bengal Finance Minister Amit Mitra said the Centre earns "much more" from taxes on petrol and diesel under the current system pointing out that the Centre may not bring the change.
"The highest slab for GST is 28 percent. If implemented, the Centre would only get 14 percent of the total revenue. So, definitely, the Union government does not want GST on fuel. It is all lies. Currently, they are in a very cosy place," Mitra told Business Standard.
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Under GST, revenues are divided equally between the Centre and states, while cesses, which account for up to 70 percent of the central taxes on petrol and diesel at present, are not shared with states, he added.
Echoing Mitra's views, Chhattisgarh Health Minister TS Singh Deo, representative of the state in GST Council meetings, also sought a mechanism where states' revenue would not reduce under the GST regime.
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"Percentages are inconsequential. The revenue that states are getting should not come down. If Chhattisgarh is getting Rs 3,000 crore now from taxes on fuel, the revenue under GST should not be lower than this and must grow over the years as consumption goes up. Hence, a compensation formula will need to be worked out,” said Deo.
Similarly, Kerala Finance Minister Thomas Isaac said the issue could be discussed in the GST council meeting, with a focus on a compensation mechanism.
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"The formula is single. Compensate us for the tax shortfall arising on account of subsuming fuel under GST," he said.
Finance Minister Nirmala Sitharaman and Petroleum Minister Dharmendra Pradhan have earlier called for the inclusion of fuel under GST and indicated that the move may bring some relief to the common man. Prime Minister Narendra Modi had also recently said that India is committed to bringing natural gas under the GST regime