The clamour to bring petroleum products under the ambit of the goods and services tax (GST) has been steadily rising, especially with the skyrocketing prices of petrol and diesel causing a stir over the past few weeks. In light of this, Abhishek Rastogi, partner at law firm Khaitan & Co said he foresees the government taking steps to include petroleum products under GST in the current financial year.

Speaking at a roundtable discussion to mark one year of GST, Rastogi said, “The view on this matter is very clear; petroleum products have to come under GST. Only timing is the issue. The constitution has a very clear provision that the GST council has to take a decision. Within this financial year it should happen.”

He then went on to say that a half-hearted approach where only certain petroleum products are brought under GST while others continue to see other levies will only result in confusion. “All these products are obtained at various stages, pressures and temperatures of the same refining process. A half-hearted approach will only create a big hue and cry in the sector. That should not happen,” Rastogi said, adding that bringing these products under GST will also tackle the cascading tax factor that the oil and gas sector faces currently.

Bringing petroleum products under the GST regime is likely to have an impact on the government’s revenues collected in the form of taxes on these products. After breaching FY18’s fiscal deficit target and raising the target for FY19 from 3% to 3.3%, experts have raised concerns over whether the government can afford to take a hit on the revenue front. However, this being an election year, analysts are not ruling out a populist measure like bringing fuel under GST.

“The government will mostly announce this in the run up to the polls and hope to ride the positive sentiment of the public to victory,” said one such analyst on condition of anonymity.

Around 95% of assessees entitled to receive GST refunds are struggling because they haven’t got the refunds within the stipulated time.
Abhishek Rastogi, partner, Khaitan & Co

In terms of other issues with respect to GST implementation that require action, Khaitan & Co said the streamlining of the GST refund process is the need of the hour. Partners at the law firm reported that several clients had approached them complaining that they were yet to see a single rupee of the refunds that they were entitled to.

“Around 95% of assessees entitled to receive GST refunds are struggling because they haven’t got the refunds within the stipulated time. This is fuelling the working capital crunch, especially for exporters,” Rastogi said.

Rashmi Deshpande, associate partner at Khaitan & Co, said the situation was reminiscent of the service tax refunds that businesses were supposed to receive after the notification in 2006, but added that things were looking up. “The first refund in the country was in 2008 in Delhi, the first in Mumbai was in 2010, and the first in Hyderabad was in 2014. So we’re in a better position now.”

Another issue brought up by the lawyers was the need to include an independent judicial representative, such as a retired judge, on the Authority for Advance Ruling. This, they said, would ensure that a pro-revenue approach is not adopted in all cases.

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