Jaitley urges states to reduce burden of VAT on petro products

New Delhi, Aug 18 :  Finance Minister Arun Jaitley today wrote to Chief Ministers of states for reduction of Value Added Tax burden on petroleum products. Mr Jaitley urged the Chief Ministers to reduce the burden of VAT on petroleum products, used as inputs in making of goods after the introduction of the Goods and Services Tax. The Finance Minister highlighted the concern being raised by the manufacturing sector in the country regarding the rise in input costs of petroleum products happening on account of transition to Goods and Services Tax regime. In the pre-GST regime, because the petroleum products as well as the final goods produced both attracted VAT, input tax credit of petroleum products being used as inputs by manufacturers was allowed to varying extent by different states. However, in the post-GST scenario, the manufactured goods attracted GST, while the inputs of petroleum products used in the manufacturing attracted VAT and, therefore, it would lead to cascading effect of taxes, the Finance Ministry said in a statement. In view of this, in the pre-GST regime, certain states had lower rate of five per cent VAT on Compressed Natural Gas used for manufacturing of goods. Some states also had lower rate of VAT on diesel being used for manufacturing sector. Mr Jaitley also requested the states to explore the possibility of having a lower rate of VAT on petroleum products used for manufacturing of those items, on which there is GST, so that there is minimum disruption in the costing of goods. UNI