Conscious Decision To Not Include Petrol, Diesel Under GST Regime: GST Council

Inclusion of petrol and diesel under the goods and services tax regime will have revenue considerations. And in its 45th meeting, the GST Council unanimously decided to keep both the products out of the GST ambit, the government told the Kerala High Court in an affidavit.

The response, filed jointly by the government and the GST Council, has come after the high court issued notice on a public interest litigation seeking inclusion of petroleum products under the GST.

Petrol and petroleum products form substantial VAT/sales tax revenue for states as well as the centre, the affidavit said.

According to Article 279 A (5), inclusion of specified petroleum products under the GST can take place only on the GST Council's recommendation, which requires the consent of both the centre and member states. The court was informed that a conscious decision had been taken by the council that now is not an appropriate time to include petroleum products under the GST's ambit.

Revenue considerations have become even more important in the light of Covid-19, the affidavit said.

The centre and states are still recovering from the deep ramifications caused by the virus, submitted the council. In this scenario, tax revenues are required to ensure that socioeconomic initiatives undertaken in larger public interest are not adversely affected, it said.

The government and the council also cited Parliament's intent to keep petroleum products out of the GST net.

The petitioner's primary contention was that the non-inclusion of petroleum products results in higher tax/duty rates, which fluctuate quite a lot. This is arbitrary, apart from being violative of right to equality and right to life, the petitioner had submitted.

In its response, the affidavit pointed to the 101st amendment which introduced the GST. The amendment specifically said petroleum and petroleum-based products will not be subjected to the GST till a date is notified by the GST Council.

Indirect tax laws on petroleum products such as charging provisions, rates, machinery and recovery provisions derive authority from these entries. So, the petitioners' argument that non inclusion of petrol and diesel under the GST regime are violative of fundamental rights are unsustainable, claimed the council.

Finally, fiscal policy is a function of several factors. And, it may not be constrained by the fact that it causes hardship to taxpayers. Once the legislature has sanctioned the law, hardships caused to the petitioner cannot be the only reason to argue that a particular tax is illegal, the affidavit said.

In the present case, however, there is no such infringement. Petitioners' argument that high taxes are affecting their right to work is devoid of merits and need to be junked, argued the council.

The matter is expected to come up for hearing on Dec. 22.