The Tamil Nadu government has opposed the move to bring petrol and diesel under GST as it will result in huge loss of revenue for the State due to change in revenue sharing mix.
“We are fundamentally opposed to bringing petrol and diesel products into the ambit of GST, according to the copy of the speech delivered by Palanivel Thiaga Rajan, Tamil Nadu’s Finance Minister at the 45th GST Council Meeting held on Friday.
He said state taxation of petrol and diesel remained one of the last vestiges of any State’s right to manage their own revenues, since the advent of GST stripped away most of the small range of rights originally written into the Constitution. As such we are reluctant to give up any of these few remaining rights, he added.
He also stated that the changing mix of revenue share between the Centre and the State had increased its concerns manifold.
‘States’ revenue hit’
The Central government’s taxation on petrol and diesel increased between 500-1,000 per cent since 2014. In 2014, the excise (shareable to the States under Finance Commission Formulae) vs cess and surcharge (not shared to the States) mix was 90:10. Now, the mix has changed to 4:96. So, not even one paisa is shared to the States from the 96 per cent component, he said.
“Under these circumstances, we feel it would be a grave, potentially fatal, injustice to shift state taxation of petrol & diesel away from levels determined solely by each state, to the ambit of GST,” he said.
However, if and when the Centre were to completely drop the levy of all cess & surcharge on such products, Tamil Nadu will be happy to reconsider its position at such a time. “This cannot be examined in isolation, without examining the overall resource distribution between the Union and States and devising the means to restore the fiscal autonomy of the States,” he said.