Petrol, diesel under GST impractical: Aayog vice-chief

New Delhi, June 25

Petroleum is the taxation milch cow for the Central and the state governments and it is unlikely to be brought under the Goods and Services Tax (GST) any time soon.

That’s also the view of the Vice-Chairman of Niti Aayog, Rajiv Kumar. Several senior ministers have demanded that petroleum products, basically petrol and diesel, be brought under the new taxation regime.

But says Kumar: “It (oil) can’t be brought under GST. That’s because the total state and Central taxes on petrol put together are around 90 per cent right now. I can’t see how any state will take a cut so huge as the highest rate under the GST is 28 per cent. A new GST band will have to be opened up — and that will be an enormous exercise.”

While supporting “in principle” the idea of bringing all items under the new indirect tax system, he said those talking about doing it now have not thought this through.

“States impose ad-valorem tax on oil and so they all had a windfall gain (when prices rose). There is a need to rationalise it,” he said, adding that “states should especially cut taxes”. Kumar said both the Central and the state governments should start the process of weaning themselves away from their dependence on oil taxation.

According to him, the Central government collects Rs 2.5 lakh crore as tax on oil out of which almost Rs 2 lakh crore goes to the states. “From where will they compensate it?” he asks, adding that if the taxes are reduced gradually, the burden on the economy will get reduced.

“Higher oil prices are like a tax on the economy. If oil prices are brought down, economic activity will also improve,” Kumar said.

“Once that is achieved, once the revenues have gone up from other sources and the economy has picked up, then you can think of bringing oil under GST. It’s not that easy,” he added. — IANS