Telangana favours a GST slab higher than 28 per cent for petrol and diesel

HYDERABAD: It may be paradoxical but Telangana, which demanded a reduction in the tax slab on works’ contracts, is likely to demand creation of still a higher slab for petrol and diesel if the two petroleum products are brought under the purview of GST. The highest GST rate is 28 pc. But, TS may demand creation of a new higher tax slab for petrol and diesel in order to protect its revenues.The state is against bringing petrol and diesel under the GST regime immediately. “Let the GST dust settle down first before the Central government can bring petrol and diesel under the purview of GST,” is the opinion of the state government.

If petrol and diesel are brought under GST, the state may demand that GST Council create a slab higher than 28 pc to protect the revenues of states. If petrol and diesel are taxed at 28 pc, the state will forgo more than half of its revenue to the Centre. Currently, the state is collecting 32.5 pc VAT on petrol and 27 pc VAT on diesel. Of the Rs 60,000-crore tax revenue to the state, VAT on petrol and diesel accounts for one-fourth. “If petrol and diesel are brought under GST, the Centre will take away 50 pc of the state’s revenue of VAT.  

It will have an adverse impact on state’s revenues,” official sources said. The state government is taking up massive developmental and welfare activities and any shortfall in revenue will affect the schemes badly. “If petrol and diesel are brought under GST, then the state will be left with no choice but to increase the tax to augment its revenue. The state cannot increase its revenue as our hands will be tied once for all,” an official pointed out. The loss of revenue to the state in the first month of GST was around Rs 300 to 400 crore.

“The actual impact of GST will be known only after six or seven months of its implementation. Let the dust settle down. Then, the Centre can think of bringing petrol and diesel under GST,” the sources said. “The state is collecting 32.5 pc VAT on petrol and 27 pc on diesel. Half of around Rs12,000 crore revenue will go to the Centre. Therefore, the GST Council should create a new slab for petrol and diesel to protect states’ revenues,” the sources said. But, any demand for creation of a new GST slab for petrol and diesel will be put forward after consulting political bosses. TS championed the cause of GST cut on work contracts, mobilised the support of other states and succeeded. 

The GST was reduced from 18 pc to 12 pc on some works and to 5 pc on some other works. Likewise, the state may mobilise the support of other states for postponement of the Centre’s decision to include petrol and diesel under GST. TS may also fight for a higher tax on petrol and diesel in order to protect the revenues of the states.