Union Finance Minister Arun Jaitley, on Friday, had written to State Chief Ministers urging the States to reduce burden of Value Added Tax (VAT) on Petroleum Products used as inputs in making of goods after the introduction of Goods and Services Tax (GST).
Mr. Jaitley highlighted concerns being raised by the manufacturing sector regarding the rise in input costs of petroleum products happening on account of transition to GST regime.
“Prior to the GST regime, because the petroleum products as well as the final goods produced both attracted VAT, input tax credit of petroleum products being used as inputs by manufacturers 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 manufacturing attract VAT and, therefore, it would lead to cascading of taxes,” the Finance Minister had stressed.
Mr. Jaitley had requested States 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.
The finance minister had cited the example of certain States having lower rate of 5 per cent VAT on Compressed Natural Gas used for manufacturing of goods, in the pre-GST era. “Some States also had a lower rate of VAT on diesel used for manufacturing,” Mr. Jaitley has reminded States, indicating they were well alive to the concerns now being raised in the industry.
