Finance Minister Arun Jaitley, on Friday, urged states to reduce value-added tax rates on petroleum products used as an input by companies registered under the Goods and Services Tax.
Petroleum products do not come under the ambit of GST, and states can impose levies. VAT rates vary in different states.
The letter written by the finance minister to state governments highlights concerns raised by manufacturers regarding the rise in input costs of petroleum products under the GST regime, a finance ministry release said.
In the pre-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.Finance Ministry Release
The release said that finance minister has requested states to explore the possibility of a lower VAT rate on petroleum products used for manufacturing, so that there is minimum disruption in the cost of goods.