States want petroleum products out of GST: FM

The government today said that states have asked for petroleum products to be kept out of the purview of the proposed Goods and Service Tax (GST).

"States requested that petroleum products, alcoholic beverages and natural gas should be kept outside the purview of the GST," Finance Minister Pranab Mukherjee said in a written reply to the Lok Sabha.

His reply came a few days after the state GST panel rejected the Centre's request to include petroleum products under GST to check volatility in their prices on account of variation in local tax rates in states.

Today, state GST panel chief Asim Dasgupta, however, said he would discuss the issue with state finance ministers.

Meanwhile, Mukherjee's deputy and Minister of State for Finance S S Palanimanickam, said that the centre cannot give directions to state governments on issues falling in the state list including VAT and the rate of local level taxes on items including petroleum products.

In a written reply to the Lok Sabha, Palanimanickam said: "VAT is a state subject under the constitution of India...It is also not possible for the Central government to issue directions to the state governments on a matter that falls in the state list."

He, however, added that the central government does take measures to check inflationary pressure.

"...The central government has, from time to time, brought to the attention of the states the inflationary impact of high state sales tax on basic petroleum products," Palanimanickam said.

Replying to another question in the Lower House of Parliament, the minister said that central excise and customs duties collected from petroleum products have fallen during the last two fiscals on account of cuts made in import duty on crude and reduction in central excise revenue in 2007-08 and 2008-09.

The total amount collected as customs and excise duty on petroleum products in 2009-10 was Rs 71,769 crore, as against Rs 78,377 during 2007-08.

However, the government has no plans to increase the duty rates.

"At present, there is no proposal for increase in rates of duty on petroleum products under the consideration of the government," Palanimanickam added.