States oppose inclusion of petroleum products and liquor in GST

At the meeting of the Empowered Committee of State Finance Ministers deliberating the revised draft of the Constitutional Amendment Bill for introduction of new indirect tax regime, among other things, several states opposed inclusion of petroleum products and liquor in the proposed Goods and Services Tax (GST) regime as the move would severely affect their revenues.

The issue was already discussed by a sub-committee of officials, set up to study the recommendations of Parliamentary Standing Committee and the revised draft of the Constitutional Amendment Bill and suggest ways for reconciling different positions. The government circulated the revised draft after incorporating the proposals of the standing committee of finance, headed by Bharatiya Janata Party leader Yashwant Sinha, which had suggested minimum exclusion to ensure an integrated, comprehensive and seamless GST regime. The industry too has been demanding that no item should be kept out of GST to ensure that there are no breaks in the supply chain.

However, majority of the states opposed bringing petroleum products and liquor in GST framework. Some were of the view that these goods have very short supply chain before consumption and could collect tax without any leakage. Some states also expressed their reservation to the inclusion of ‘entry tax’ in the GST fold. Earlier, petroleum products and alcoholic liquor for human consumption were kept outside the purview of VAT under the VAT regime.