Opposition repeats demand for petrol sales tax cut, Balagopal repeats no

By now it is clear that the second Pinarayi Vijayan ministry will not sacrifice a paise of its revenue to slash fuel prices. Yet, the UDF keeps trying. 

The issue had come up at least five times in the ongoing session and, each time, finance minister K N Balagopal had told the House that the government would not reduce the sales tax it imposes on fuel and would oppose any attempt to include petrol and diesel within the ambit of Goods and Services Tax. 

This, however, did not prevent former minister and Congress MLA Thiruvanchoor Radhakrishnan from flagging the issue once again in the Assembly on Wednesday. He called the attention of the finance minister to the necessity of including petroleum prices in GST. 

Thiruvanchoor said that over 56% of fuel price was made up of various kinds of taxes and levies. He said if petrol and fuel were brought under the GST, the maximum tax that could be imposed was 28% (which is the highest GST slab), " Thiruvanchoor said. 

Balagopal agreed that 28% was the upper GST limit, but said that such a move would result in a drastic fall in revenue for the state. "Even if petroleum products are slapped the maximum GST rate of 28%, Kerala would get just 14% (as the other half goes as Central GST to the centre's kitty), " Balagopal said. "This would cause a massive fall in the state's revenue, " he said. 

Not just Kerala, other states too would feel the pinch. The finance minister said that all states, including Congress-ruled ones like Rajasthan, Punjab and Chhattisgarh, had unanimously opposed the move to include fuel under the GST regime. 

Balagopal also argued that there was no guarantee that fuel prices would settle at a lower level if included in the GST structure. As proof, he gave the example of cooking gas cylinder, which comes under the GST. "The GST on cooking gas is only 5% but the cost of a cylinder had shot up from Rs 524 in 2017 to Rs 910," he said. 

Balagopal's point was that it were the centre's frequent increases in special duties that were causing the forever rising fuel prices. Meaning, the Centre can impose new levies like it is doing now even if petroleum products were brought within the GST. 

He said while Kerala imposes Rs 17 as sales tax on a litre of diesel, the centre imposes Rs 33 as excise duty, special excise duty and other cesses on a litre. 

In 2014, the central impositions on a litre of fuel were Rs 9.47 (petrol) and Rs 3.57 (diesel). Now, these are Rs 32.9 (247.41% increase) and Rs 31.8 (792% increase).

Balagopal said fuel prices would cool once the Centre stops this frequent increase in duties. 

Further, he said the LDF government had not increased the sales tax on petrol and diesel in the last six years. In 2018, he said the LDF government had brought down the sales tax on petrol and diesel to 30.8% and 22.76% from the levels prevailing under the Oommen Chandy dispensation (31.86% and 24.52%).