As Telangana gears up to meet its targets in tax collections after introduction of the Goods and Services Tax (GST) regime, the Commercial Taxes Department appears to be worried over the reports of the Central government’s intentions to bring petroleum products under the purview of the new tax regime.
The Department has a good reason to be concerned as the latest announcement by the Central Government reducing the basic excise duty on petrol and diesel by ₹ 2 a litre had imposed huge burden on the exchequer. Senior officials claimed that the reduction announced by the Centre was likely to reduce the Value Added Tax on these products by ₹ 44 crore every month, costing the State over ₹ 500 crore.
Guarded approach
Compounding the problem was the Centre’s request to the States to reduce taxes by at least 5%. The State had decided to adopt a guarded approach on the Centre’s request as it would be a huge burden on the exchequer. The quantum of revenue generated through VAT on petroleum products could be seen from the fact that the State registered collection of VAT to the tune of ₹ 700 crore in July and ₹ 682.69 crore in August.
“It is not just the question of collection of taxes. The State stands to lose the leverage of hiking VAT and other duties to balance shortfalls if need be once these products are taken under the purview of the GST,” a senior official said. The Government currently charges VAT of over 20 % and coupled with this is the collection through the entry tax taking the State among those collecting high rate of tax on petroleum products.
Election notification
Officials are sure that it was only matter of time before the Centre takes petroleum products under the purview of GST as it was lagging behind expectations in tax collections post GST.
They are, however, confident that the issue is unlikely to be touched by the Centre in the next few months following notification issued on Thursday for Assembly elections in Himachal Pradesh.
