The Goods and Services Tax Council comprising the finance ministers of all states and Union territories and Union finance minister which met here on Friday failed to arrive at a decision on the inclusion of petroleum products and diesel in the GST.

Union Finance Minister Nirmala Sitharaman said that it was not time for including petrol and diesel in the GST regime.

The 45th meeting of the GST Council, chaired by Union Finance Minister Nirmala Sitharaman, and comprising state finance ministers, is the first physical meeting since the onset of the COVID-19 pandemic. The last such meeting took place 20 months ago on December 18, 2019.

The GST Council’s agenda included discussion on taxing petrol and diesel under the single national GST regime, extending tax concession to 11 COVID-19 drugs, and review of tax rates of over four dozen items, like oncology medicine and coconut oil among others.

The discussion on inclusion of petrol and diesel under GST was taken on the direction of the Kerala High Court. The court had directed the matter to be placed before the GST Council for discussion. However, the Centre and the states failed to arrive at a decision regarding the inclusion of petrol and diesel under the ambit of the GST regime.

The finance minister of Kerala vehemently opposed any move to bring petrol and diesel under the GST regime, saying it would further reduce revenue generation for the state and asserted that the Centre should reduce its levies on the two commodities to provide relief to the common people.

Central excise and state VAT (value-added tax) make up for almost half of the retail selling price of petrol and diesel. Bringing them under the Goods and Services Tax (GST) would impact revenue generation for the states.

Kerala Finance Minister KN Balagopal said the fuel prices skyrocketed due to the huge increase of its cess by the Centre and if the Union government reduced the cess it would help in bringing down the prices of petrol and diesel. According to him, if petrol and diesel were brought under the GST regime, the state would lose Rs 8,000 crore annually.

UP Finance Minister Suresh Khanna also opposed the move. He tweeted: “The state is opposed to petroleum products being brought under GST as the state will lose a big source of revenue and ultimately it won’t be in people’s interest.” Khanna also claimed the issue of bringing petroleum products under the GST regime was not in the agenda of the GST Council meeting.

The GST Council granted exemptions to certain life-saving drugs and the drugs suggested by the health ministry for treating muscular atrophy. Union Finance Minister Nirmala Sitharaman said, “We have seen in the last one year and probably earlier that some life-saving drugs, which are not connected with Covid are very expensive. Exemptions have been given for such drugs.”

She added, “I am giving the names of two because those two are very expensive drugs -- Zolgensma and Viltepso. These two are very important drugs which cost something like Rs 16 crore. So the Council has decided to grant exemption from GST for these two.”

The finance minister further added, “Drugs that are suggested by the Health ministry for treating muscular atrophy, on the recommendation of Health Ministry and Department of Pharmaceuticals, are also exempted for IGST on import for personal use.”

To check the tax evasion by restaurants, the GST Council has fixed a levy level for food-delivery apps like Swiggy and Zomato. The Council stated that the place of the delivery would be the point where the tax would be collected by the food delivery apps. They would pay GST on it. The finance minister said there was no new tax. The tax was earlier payable by the restaurants, now the tax would be paid by the food delivery aggregators.

The Centre has declined to extend the period of compensation to states beyond five years or July 2022. The GST Council has, however, set up a Group of Ministers (GoM) to chalk out the crucial issue of compensation for states beyond June 2022. The GoM has been tasked with discussing all issues involved in compensations and compensation cess and has been asked to submit the report to the GST Council in two months.

The Centre, in June 2017, had guaranteed annual hike in tax collections to all the states after the implementation of the GST. The Centre had also promised to compensate the states for the shortfall in revenue. The Centre has said the period of cess collection under GST will be extended till March 2026 and the proceeds will be utilised for the repayment of the loans obtained by the states in 2020-21 and 2021-22 on account of shortfall in revenue due to Covid.

The GST Council discussed how long it would take for states to repay the amount borrowed last year. During the current fiscal, the Centre has already paid Rs 75,000 crore to the states for the compensation shortfall.