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FM asks states to reduce VAT on petroleum products
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SME Times News Bureau | 18 Aug, 2017
Finance Minister Arun Jaitley on Friday urged states to reduce VAT on
petroleum products due to concerns regarding the rise in input costs due
to the transition to GST regime.
"The letter by Finance Minister
to Chief Ministers highlights the concern being raised by the
manufacturing sector," the Finance Ministry said in a statement.
The
industry had flagged concerns on increase in the cost of petroleum
products, used as inputs for manufacture of goods, due to cascading of
taxes.
In the pre-GST regime, because the petroleum products as
well as the final goods produced both attracted VAT, input tax credit of
petroleum products was allowed to varying extent by different states.
However,
in the post-GST scenario, the manufactured goods attract GST while the
inputs of petroleum products used in the manufacture attract VAT and,
therefore, it would lead to cascading of taxes.
In view of this,
in the pre-Goods and Services Tax regime certain states had lower rate
of 5 per cent VAT on Compressed Natural Gas (CNG) used for manufacturing
of goods.
Some states also had lower rate of VAT on diesel used by manufacturing sector.
"Thus,
Jaitley has requested other states also to explore the possibility of
having a lower rate of VAT on petroleum products used for manufacturing
of those items on which there is GST, so that there is minimum
disruption in the costing of goods," it said.
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