Confederation of Indian Industry (CII) has called for inclusion of Petroleum and Natural Gas under GST at the earliest. Till such time as this is done, C Forms should be continued to avoid high tax incidence on these products.
CII said that GST has been rolled out from 1 July 2017 by subsuming most of the Central and State indirect taxes into a single tax. However, Petroleum and Petroleum products (Crude Oil, Natural Gas, HSD, MS, and ATF) are outside the ambit of GST as of now.
Though the understanding is that the previous VAT and CST rules would continue to apply to the excluded products, however, the related sectors continue to incur huge GST impact on all inputs without any set-off, as sale of crude oil and natural gas are outside the purview of GST and are subject to existing Oil Industry Development Act (OIDA) Cess, Central Sales Tax Act and State Value Added Tax, said a CII press release.
As per the earlier provisions of CST Act, a purchaser can make the interstate purchase of the non GST goods (petroleum and petroleum products) by availing concessional rate of CST at 2 per cent against Form-C for re-sale by him, or use by him in the manufacture or processing of goods for sale, or use by him in the telecommunication network, or use by him in mining, or use by him in the generation or distribution of electricity or any other form of power.
Hitherto, fertilizer manufacturers, power producers, automobile manufacturers and other industries were buying natural gas and other petroleum products by paying CST at 2 per cent against Form-C being purchased in other states.
However, after introduction of GST, credit on VAT paid on petroleum products including natural gas is not available and the amendment of the CST act has significantly altered inter-state sale of the products. Therefore, post GST, there has been an increased tax cost on the products, which was not the intent of the government, pointed out CII.