Arun Jaitley asks states to reduce VAT on petroleum products

Finance minister Arun Jaitley on Friday asked States to lessen burden of Value Added Tax (VAT) on Petroleum Products used as inputs for manufacturing of goods after the introduction of Goods and Services Tax.

In a letter Jaitley raised concern by the manufacturing sector regarding the rise in input costs of petroleum products taking place 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 attract GST while the inputs of petroleum products used in the manufacturing attract VAT and, therefore, it would lead to cascading of taxes," the letter stressed. Jaitley had requested 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.