Crude oil, petroleum products may be covered under GST

The Goods and Services Tax (GST) council is going to take up a proposal to include petroleum products, including crude, under the GST net.

If brought under the GST regime, it will reduce the inflationary impact of the tax.

The GST council will toy with the idea of levying around 2-3% GST to allow smooth flow of credit and remove cascading.

However, states will continue to have freedom to levy local sales tax on it. Earlier, states were against the GST on petroleum goods but now are looking at it from a different angle as it will bring down the overall tax rate and allow the industry to get credit.

"If the petroleum products are taxed at a GST rate which is equivalent to the input GST cost, the cascading of taxes would be mitigated and the final price of the products may reduce," Bipin Sapra, partner, EY, told ET.

Sapra said this will allow some credits to the sectors such as power, airlines, transport of goods and passengers, which will help in reducing the cost of these services.

Chief Economic Adviser Arvind Subramanian-led GST council may propose GST at 18%.

"Bringing electricity and petroleum within the scope of the GST could make Indian manufacturing more competitive," the report had said.