GST won't reduce petrol, diesel prices, says Kerala Finance Minister

New Delhi: Kerala Finance Minister K N Balagopal on Saturday opposed the idea of bringing petrol and disel prices under the ambit of the Goods and Services Tax (GST).

Addressing the media here, Balagopal said that it is misleading to say such a move will reduce the fuel prices.

"Bringing the petrol and diesel under the GST will not have any impact. The central government is collecting Rs 28 for diesel and Rs 26 for petrol as special cess, outside the divisive pool which is not shared with states. Fuel price can be brought down only by removing the cess," he stated.

Most of the states opposed the idea of bringing the fuels under GST, the minister added.

On Friday, the GST Council, headed by the Union finance minister and including representatives from all states and UTs, had decided to continue keeping petrol and diesel out of the GST purview as subsuming the current excise duty and VAT charged by states into one national rate, GST, would impact their revenues.

'Time not apt to bring fuel prices under GST'

After the meeting in Lucknow, Union Finance Minister  Nirmala Sitharaman had noted the Council discussed the issue only because the Kerala High Court had asked it to do so but felt it was not the right time to include petroleum products under GST.

"It will be reported to the High Court of Kerala that it was discussed and the GST Council felt that it wasn't the time to bring the petroleum products into the GST," she said.

'Extend compensation period'

Meanwhile, Balagopal also demanded extending the GST compensation period beyond June next year as he highlighted that Kerala is already grappling with significant revenue shortfall.

The minister said Kerala is not getting its due in the wake of the devolution recommendations of the 15th Finance Commission.

Kerala will be receiving GST compensation of over Rs 13,000 crore and another one-time grant of over Rs 19,000 crore in the current fiscal ending March 2022, he noted.

If the GST compensation period ends next year, then the state will face further revenue shortfall, Balagopal said, and expressed hope that the compensation regime would be extended.

The practice of paying compensation to states for revenue shortfall resulting from subsuming their taxes such as VAT in the uniform national tax, GST, will end in June, 2021.

However, the cess which is currently levied on top of the GST rate on certain luxury and sin goods to fund the compensation amount for states will continue to be levied till March 2026. The collections will be used to pay off the borrowings that had to be done since 2020-21 to pay for state compensation.

(With PTI inputs)