Skip to main content

FM asks states to cut VAT on petro products

By
FM asks states to cut VAT on petro products
Finance Minister Arun Jaitley has written to all Chief Ministers urging them to reduce Value Added Tax (VAT) on petroleum products used in the manufacture of goods as the current system was leading to cascading of taxes on such goods under the Goods and Services Tax (GST) regime.
Currently, crude oil, natural gas, petrol, diesel and aviation turbine fuel are out of GST purview. All other petroleum products fall under the new indirect tax.
“The letter by Finance Minister highlights a concern being raised by the manufacturing sector in the country regarding the rise in input costs of petroleum products happening on account of transition to Goods and Services Tax regime,” the Finance Ministry said. “In the post-GST scenario, manufactured goods attract GST while inputs of petroleum products used in the manufacturing attract VAT and, therefore, it would lead to cascading of taxes.”
“These products are a principal source of revenue for the states, so that’s why they were kept out of GST,” Anish De, partner and head, strategy and operations advisory (infrastructure) at KPMG in India. “There was always a concern about input tax credits. 
There is logic in what the Finance Minister has said since it was pointed out earlier that there would be an inflationary impact. The question is whether the states will abide by it. 
The financially better off states might agree, but others might not.”
The view also is that this cascading of taxes due to the applicability of VAT would affect natural gas companies more significantly, since the alternatives to natural gas, such as naphtha, fuel oil and LPG are under GST.
“When a company sells piped natural gas, it is under VAT,” K. Ravichandran, senior vice president, group head — corporate sector ratings at ICRA said. “It cannot be set off under GST, so it becomes an additional cost. But alternatives to natural gas come under GST and so input credit is available.”
The overall view is that it would eventually be more practical to include all petroleum products under GST.
“It would have been better to include petroleum in GST,” Mr.De said. “Eventually the solution would be to include it all in GST, there is no other practical way.”
“The revenue foregone by bringing natural gas under GST would be minimal, but the effect on companies is significant,” Mr. Ravichandran added. “I don’t think states will reduce VAT on petrol, diesel, and ATF since they are major revenue sources.”
The Economic Times, New Delhi, 19th August 2017

Comments

Post a Comment

Popular posts from this blog

RBI deputy governor cautions fintech platform lenders on privacy concerns during loan recovery

By
  India's digital lending infrastructure has made the loan sanctioning system online. Yet, loan recovery still needs a “feet on the street” approach, Swaminathan J, deputy governor of the Reserve Bank of India, said at a media event on Tuesday, September 2, according to news agency ANI.According to the ANI report, the deputy governor flagged that fintech operators in the digital lending segment are giving out loans to customers with poor credit profiles and later using aggressive recovery tactics.“While loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a 'feet on the street' and empathetic approach. Many fintech platforms operate on a business model that involves extending small-value loans to customers often with poor credit profiles,” Swaminathan J said.   Fintech platforms' business models The central bank deputy governor highlighted that many fintech platforms' business models involve providing sm
Post a Comment
Read more

Credit card spending growth declines on RBI gaze, stress build-up

By
  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the rep
Post a Comment
Read more

India can't rely on wealthy to drive growth: Ex-RBI Dy Guv Viral Acharya

By
  India can’t rely on wealthy individuals to drive growth and expect the overall economy to improve, Viral Acharya, former deputy governor of the Reserve Bank of India (RBI) said on Monday.Acharya, who is the C V Starr Professor of Economics in the Department of Finance at New York University’s Stern School of Business (NYU-Stern), said after the Covid-19 pandemic, rural consumption and investments have weakened.We can’t be pumping our growth through the rich and expect that the economy as a whole will do better,” he said while speaking at an event organised by Elara Capital here.f there has to be a trickle-down, it should have actually happened by now,” Acharya said, adding that when the rich keep getting wealthier and wealthier, they have a savings problem.   “The bank account keeps getting bigger, hence they look for financial assets to invest in. India is closed, so our money can't go outside India that easily. So, it has to chase the limited financial assets in the country and
Post a Comment
Read more