Bringing petrol and diesel into the GST system will not be easy, it will take time. According to the report of brokerage firm Nirmal Bang, there will be several rounds of talks to fix the rate so that the states do not lose revenue. Experts say that if both the fuels come under the purview of GST, then the hands of the states will be tied in taking decisions related to budget and earnings.
For the first time since the onset of Covid, a physical meeting of the GST Council is being held under the chairmanship of Finance Minister Nirmala Sitharaman. In the meeting, the council members are sitting face to face and discussing important issues related to tax. According to sources, the council's agenda includes changing the tax rate on many items, including bringing petrol and diesel under the purview of GST.
Discussions can be held to continue the cess levied even after 2022 to compensate for the revenue loss that the states are incurring due to the adoption of the GST system. Apart from this, there may also be a proposal to continue the reduction in the tax rate on the material related to Kovid.
As far as bringing petrol and diesel under the purview of GST, both the fuels will become very cheap. But it will not be easy to persuade the states for this. Because the Center will have to work out the tax rate at which they do not lose. Petrol and diesel are a major source of income for the state governments, which they do not want to hand over to the Centre.
A tax expert with a foreign accounting firm said, "If petrol and diesel come under the ambit of GST, then the states will be tied in the matter of taking decisions related to budget and earnings. This being a politically sensitive matter, it is not likely to happen much. Some recommendations may be made in the meeting and a new committee may be formed.
Actually, the states have made a different tax system to earn from them, under which many types of taxes are levied on them. For this reason, the prices of petrol and diesel in India are much higher than in many countries. Petrol and diesel are taxed by states after adding crude price, transportation cost, dealer's commission, and central excise duty.
According to the report of brokerage firm Nirmal Bang released on Thursday, 'States levy VAT on petrol, diesel and natural gas. In the GST system, there will be several rounds of talks to fix the rate so that there is no revenue loss to the states. The states which charge more than 28% tax on petrol and diesel will have a revenue loss even in the topmost slab of the GST rate.
To compensate for the revenue loss of the states, the government is borrowing Rs 1.59 lakh crore due to the fall in the cess.
The Center is confident that it will pay the compensation gap of FY 2022 and the dues of FY 2021.
The Center can give any option to the states regarding extension of compensation for revenue loss.
Tax exemption on Amphotericin B and Tocilizumab may be extended till December 31.
The concessional rate of 5% on Remdesivir and Heparin can also be extended till December 31.
GST rate of 5% instead of 12% on Favipiravir and seven other drugs can be kept applicable till December 31.
Rate on Solar PV Module Renewables/Equipment can be increased from 5% to 12%.
The tax rate on diesel-electric locomotives may be reduced from 12% to 18%.
The rate of copper concentrate can be increased from 5% to 18%.
This will allow producers to take an input tax credit.
The tax rate on biodiesel mixed with diesel may be reduced to 5% from the current 12%.
Carbonated beverages containing fruit juice may attract a cess of 12% along with 28% GST.
A package of more than one liter of coconut oil can be taxed at 5% and less at 18%.
-CCI can be allowed to take up the case of profiteering.
-Covid cess can be imposed on interstate pharma supply in Sikkim.
The amount of tax that is levied on the restaurant, the same can be levied on the food delivery app.
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