The Central Board of Indirect Taxes and Customs (CBIC) chairman Vanaja N Sarna, on Tuesday said petroleum products will eventually come under the ambit of the Goods and Services Tax (GST), which will complete its first year of implementation on July 1.
However, Sarna added that there is no need to reduce items in a hurry in the 28% GST bracket, because this involves a certain amount of revenue loss.
“As a matter of discussion, the council may like to take a view on the need to reduce rates. But it has revenue implication and has to be looked holistically,” she added.
Watch Here: Petroleum products will eventually come under GST, says CBIC chairman Vanaja N Sarna
Edited Excerpt:
Q: Will there be a reduction in the number of items in the 28 percent tax bracket in the next goods and services tax (GST) council meet?
A: The number in the 28 percent bracket has reduced hugely and it is just about 50 items which is not to say that there is no scope for correction or for many changes. It is definitely there but with this passage of time a lot has settled in the GST including the rate regime.When we set out to fix the rates, it was done on revenue neutral rate system which we moved a little away from to ensure that there was rationalization that goods which needs to be available for local consumption, for common people is kept in the lower bracket. So while I would say there is scope to move from 28 percent to the lower level. I do not think it needs to be done too much in a hurry because all of this also involves a certain amount of revenue loss. So that’s something as revenue department we need to always keep in view while looking at rate changes but that is not to say that there is no scope, in fact there is scope for looking at these. The question is of timing.
Q: Do you think the next GST council would be the right time to approach the council at least for a few items for this correction or maybe a view to take whether it’s right time to move to the lower bracket especially when it comes to cement, paint etc.
A: The next meeting is still a while away, about three weeks away. So the agenda is still being finalized. Whether it should be discussed? Yes, certainly as a matter of discussion the council may like to take a view on the need to reduce rates but as I said it has revenue implication so it has to be looked holistically, first.
Second, revenue itself is stabilizing perhaps rather than doing it too early it is better to wait for few months and look at how revenue is doing in this financial year before rushing into make any changes.
Q: When we talk of revenue, as you right mentioned that revenue is still stabilizing. In the Budget you projected a monthly average of Rs 1.15 lakh crore that should be a monthly average of revenue collection but we are still far away. The first month’s collection were not in tune with this monthly average, they were quite low. However, by when would it be right or by when we could start achieving this monthly average?
A: Let me take you back to the first revenues that poured in starting from July of 2017; July-August-September were relatively good months which gave over Rs 92,000-93,000 crore then there were some difficulties experienced as far as filing of returns and payment and other issues which brought the revenue down for the next few months.
So we went into 80s; so 88-89, in fact 83-84 and slowly 88-89 and then of course in the month of March which is a very traditional March phenomenon, it crossed the 1 lakh crore mark but we at that time as well said that that’s not a standard to go by because that is a March phenomenon, the end of the year phenomenon but if you look at the month after that, we are talking about Rs 94,000 crore which is quite a bit from the Rs 88,000-89,000; it is a growth.
So with all the various different changes that have been made, the introduction or the push for enforcement, the introduction of the e–Way bill system and gradually now we will be going into auditing, scrutiny, a lot of these measures will definitely look at -- I think we can hope definitely for new buoyancy.
Q: When we talk of trimming of items, does this also provide some scope for getting in some of the new items for example aviation turbine fuel (ATF), petroleum products. There was a huge hue and cry when it comes to the petrol and diesel prices of late. You are aware of it. Excise is one of the major concern, a lot of opposition was calling for an excise cut. Do you think it is right time to get ATF and natural gas under the ambit of GST and by when can we see an excise cut coming on the petroleum prices which could provide a breather?
A: As far as petroleum products are concerned other than alcohol which his kept outside of GST everything else is GST taxable and the petroleum products particularly, they have been mentioned also in the act itself. So definitely a time has to come when they will slowly come in.
The question here is of timing because once again you will be looking at revenue as what are the revenue implications when you talk about ETF or natural gas but eventually if you want to give the benefit to the consumer and that is the intention and if you want to give the benefit to the business entity as well you want to stop a lot of cascading which itself what GST was all about.
So no tax on tax is what we were looking at and the benefit of getting input tax credit would be very much there once you introduce these items as well in the GST, I think this is something the council would have to take a look at and look at it holistically in terms of revenue loss, in terms of effect it has on the state revenue and then take a considered view.
Q: Do you think it is right to consider that once these items come under the ambit of GST, the burden on the common man when it comes to paying the maximum retail price would reduce especially when it comes to diesel and petrol?
A: Yes, certainly. If you bring any of these items into the GST net, as I mentioned earlier, you would be getting the benefit of input tax credit. So that automatically would make the prices of the final product drop and definitely it would be beneficial to the consumer.
Q: Also there is a group of ministers (GoM) constituted right now on sugar cess which is again a sticky issue. There were two suggestions that were put forward in the last council meeting when it comes to sugar cess, one by CEA where he suggested a blanket levy of 1 percent and the other of 3 percent only on sugar per se. What do you think is the right approach to give the benefit to the farmers because that was the main agenda to propose this particular cess? How should the council see it?
A: There is a group of ministers that has been constituted by the honorable finance minister which is meant to look into this aspect. So it would be incorrect for me to give any view as such when there is a committee looking at it.All options would be placed before them, the goal and the purpose of why this should be done to benefit the sugarcane farmers is definitely something to be looked at.
Whether this is the right option or whether there is any other option, is another issue that will have to be looked at. So I believe that group of ministers is doing so. So we will have to wait and see the conclusion that the group of ministers comes to.
Q: What is your personal view on this?
A: On a personal note, I think assuaging the problems of the sugarcane farmers is a must. The question is when GST itself was conceptualized as a tax which in fact had merged a whole lot of cess’s, to introduce the cess again maybe something slightly difficult because there could be demands from other areas as well.
So that is why it has to be considered very deeply and the consequences of taking a decision like this across the board will have to be seen and I think who better than the group of ministers who are absolutely aware of the problem of the farmers, want to help them out and have to look for the best option.
Q: As you rightly mentioned that a lot of other commodities would also want such a cess if you introduce it for one, and that is what group of ministers is also deliberating upon. This was one of the concerns sighted by the ministers in the last council meeting when the proposal was being discussed. What could be the next few items or is the suggestion of CEA of having a 1 percent blanket levy, is that a probable better solution?
A: They are all options as I said and one has to weigh them in the larger interest of the goal that you are looking at and what are you giving up to reach there. So I think this has to be a conscious decision of the council itself.
Q: Recently your department has also notified 29 tariffs against US products. However, the implementation of these tariffs will be done only from August 4. Why such a gap, what explains this gap of implementation?
A: There is a 45 day period which is a permitted period and that is why it has been followed; nothing unusual in that.
Q: But there are also media reports that government might consider to recall this decision. Do you think that is in offing?
A: No, not that I am aware of. I do not think so, but what is a permitted gap which is already allowed has been followed.
Q: Why was motorcycles kept out of this, because that was also being considered?
A: There were a number of items that were being considered and what was felt appropriate was kept.
Q: So no other reasons to keep motorcycles outside because a lot of hue and cry was there that it is because prime minister has already promised President Trump about it.
A: When you look at whole lot of items that you are putting in, it is a considered decision keeping many factors in mind. So, it will be difficult to get into the factor on each of these items.
