Budget 2018: As the date of the presentation of union budget 2018 nears, budget expectations from Arun Jaitley has reached its pinnacle. This will be Modi government's fifth budget and is often regarded as one of the most important budgets of its tenure.
Budget 2018: As the date of the presentation of union budget 2018 nears, budget expectations from Arun Jaitley has reached its pinnacle. This will be Modi government’s fifth budget and is often regarded as one of the most important budgets of its tenure. Last year, one of the most important tax reforms in the history of India was brought by the Modi government. GST or Goods and Services Tax was brought to bring all the tax reforms under one umbrella. With the continuous rise in petrol prices and natural gas rates, many efforts are in place by the government to counter the price rise, however, there is still room improvement. As per the pre-budget memorandum by FICCI, the inclusion of Petroleum & Natural Gas within GST framework (including regasified LNG) Petroleum products directly enter as an input into a large number of economic activities (e.g., transportation, electricity generation and fertiliser production).
Apart from such direct uses, FICCI states that there are more indirect uses as well. Therefore, changes in prices (or taxes) of petroleum products would have a significant impact on the economy both through direct as well as indirect or cascading routes. The cascading overall impact on the other core sectors which are critical will be such that it would seriously impact the manufacturing competitiveness of India. Thus, increase in tax incidence would not only increase the Capital Cost of the Oil and Gas Sector but will also have an inflationary impact on the economy. In view of the abovementioned adverse impact for non-inclusion of the Petroleum Products in GST regime, FICCI’s request are:-
Option 1: Petroleum Products be included in the GST regime All petroleum products such as petrol, diesel & natural gas should be immediately brought under the ambit of the GST regime. Non-inclusion of the same has pushed up costs for the 56 sectors. No input credit is available on goods and services used for petroleum operations. Denial of credits has resulted in massive cascading impact and increased the cost of production placing the domestic industry in a competitively disadvantageous position. This has an adverse impact on investments in this sector which is critical for energy self- sufficiency and import substitution. It is recommended that oil and gas be included in GST regime, and thus, GST is levied on sale/supply of oil and natural gas. This inclusion will provide free-flow of credit and avoid cascading impact.
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Option 2: Petroleum sector/Oil and Natural Gas sector may be accorded a status of zero-rated goods under GST regime The Government may consider granting the zero-rated goods status to Oil and Gas industry. The zero-rated status should allow this industry to claim a refund of GST paid on procurement of goods and services.
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Option 3: Petroleum sector/Oil and Natural Gas sector may be charged a nominal rate of GST Charging of nominal rate of GST on the output of Oil and Gas industries will enable these companies to avail the credit of input GST credit, therefore, avoiding stranding of costs.