Petrol under GST will hurt state more than Centre: AP government

Amaravati: The proposal of bringing petroleum products into the ambit of Goods and Services Tax (GST) is being opposed by the state governments. The Andhra Pradesh government is against the Central government bringing natural gas, one of the petro products, into the GST.

If the Centre brings petrol, diesel and other petroleum products into the GST, then the states are going to end up with huge revenue losses, which will hurt financially weak states like AP most. 

The Central government is collecting Rs 19.75 on petrol and Rs 15.65 on a litre of diesel as excise duty. At the same time, the AP government is collecting Rs 12.25 at 22.25 percent of VAT on diesel and Rs 17.70 at around 31 per cent VAT on petrol.

In addition to that, the state government imposed Additional VAT of Rs 4 on both petrol and diesel in the state, according to the AP Petroleum Dealers Association president Ravi Gopalakrishna Rao and YV Eswara Rao, general secretary, AP Lorry Owners Association.

At an average, taxes by both the state and the Central governments constitute more than 50 per cent of the prices of petrol and diesel prices . If it comes under the ambit of GST Act, then the taxes must be below 28 per cent, which means the revenue of both the governments will be reduced drastically.

At the same time, the Central government started imposing Road Cess at Rs 8 on a litre of petrol and diesel. This could be imposed even if the products are brought under GST. By imposing such cesses, the Central government could retain its revenue, but states may not have such opportunity, according to the officials at the finance department.

The Lorry Owners Association and Petrol Dealers Association leaders are demanding that the state and central governments repeal the Additional 
VAT of Rs 4 and Road Cess of Rs 8 respectively.

If the two governments do so, then there will be a cut of at least Rs 12 on both petrol and diesel prices with immediate effect. State finance minister Yanamala Ramakrishnudu said that the state government was getting around Rs 5,000 crore as revenue per year on petrol and diesel products.

According to him, if the Central government unilaterally brings it into the GST ambit then the state will lose one of the major revenue sources. At the same time, the Central government would enjoy its revenue without suffering like states, he added.

When asked to removal of Additional VAT of Rs 4 on petrol and diesel imposed by the state government, Chief Minister N Chandrababu Naidu said that there would be not much difference in price even though the state abolishes it. He further said that the Central government should take necessary initiatives to minimise the burden on consumers.

At this juncture, it is worth to mention that the prices of petro prices were stable when there were general elections for Karnataka and byelections for some constituencies in some states recently.

“If the Central government really wants to control the prices then it is not a problem at all,” observed Gopalakrishna Rao of  Petroleum Dealers Association