GST Council begins: Kerala not in favour of bringing petrol, diesel under GST ambit

Lucknow: The 45th meeting of the GST Council, chaired by Finance Minister Nirmala Sitharaman and comprising state finance ministers to decide on extending tax concession to 11 COVID-19 drugs and review tax rates of over 4-dozen items, like oncology medicine and coconut oil, began on Friday.

The council is expected to decide on bringing petrol and diesel within the single national GST tax regime. In June, the Kerala High Court, based on a writ petition, had asked the GST Council to decide on bringing petrol and diesel within the GST ambit.

Since the onset of the COVID-19 pandemic, GST council has been meeting via video conferencing. The last such meeting took place 20 months ago on December 18, 2019.

Friday's meeting does not have the provision of video conferencing and almost all state finance ministers, except Gujarat, are attending the meeting. The council would also discuss the modalities of compensation payable to states from July 1, 2022.

Meanwhile, The government of Kerala said on Thursday that it will vehemently oppose any move to bring petrol and diesel under the Goods and Services Tax (GST) regime as that will further reduce revenue generation for the state, reports The News Minute. According to the report, the state asserted that the Union government should reduce its levies on the two commodities to provide relief to the common people.

A PTI report quoted Kerala Finance Minister KN Balagopal saying that the state will strongly oppose it if there is any move to bring petrol and diesel under the GST regime.

According to Minister Balagopal, if petrol and diesel are brought under the GST regime, the state will lose Rs 8,000 crore annually.

The reaction from Kerala Finance Minister proves that bringing petrol and diesel under a single GST regime might require huge compromises by both central and state governments on the revenues they collect from taxing these products.

Five commodities such as crude oil, natural gas, petrol, diesel, and aviation turbine fuel (ATF) were kept out of the GST purview when it was introduced on July 1, 2017, considering the heavy revenue dependence of the Union and state governments on them.

Recently, the spike in global oil prices on-demand recovery pushed petrol and diesel prices to an all-time high, leading to a demand for bringing it under the GST.

The council will also discuss the proposal of reducing GST from 12 per cent to 5 per cent on seven more drugs till December 31, 2021.

To curb tax evasion, the proposal to make the food delivery platforms like Swiggy and Zomato liable to pay the Goods and Services Tax on restaurant services supplied through them would also be considered by the Council.

Once approved by the GST Council, food delivery apps will have to collect and deposit GST with the government, in place of restaurants, for deliveries made by them. There would be no extra tax burden on the end consumer.

As per estimates, tax loss to the exchequer due to alleged under-reporting by food delivery aggregators is Rs 2,000 crore over the past two years.

Also, the interim report of a state-ministerial panel on capacity-based taxation on pan masala and composition scheme for brick kilns and stone crushers would come up for discussion.

The panel, which has sought a three-month extension of its term to examine remaining issues, has recommended a special Composition Scheme in the brick kiln sector with effect from April 1, 2022, prescribing a GST rate of 6 per cent, without ITC (input tax credit), similar to the rate in the services sector.

It has also suggested hiking GST rate on supply of bricks from 5 per cent to 12 per cent (with ITC), with effect from April 1.

The council will review and also clarify regarding GST rates of 32 goods and 29 services.

The items under review are Zolgensma and Viltepso medicines for personal use, solar PV modules, copper concentrate, carbonated beverage with fruit juice, coconut oil, scented sweet supari, oncology medicine, and diesel-electric locomotives.