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Published: July 7, 2023
Updated: July 7, 2023

CBIC Chairman Vivek Johri Suggests Global Models to Bring Fuel Under GST in India

Vivek Johri, Chairman of the Central Board of Indirect Taxes & Customs (CBIC), has proposed that India can include fuel products like petrol and diesel in the Goods and Services Tax (GST) regime by following international models. He suggests splitting the tax burden into two parts, with states retaining a share of the revenues. While states have concerns about the potential impact on their tax collections, excluding fuel from the nationwide indirect tax regime introduces inefficiencies. Johri also outlines the CBIC's focus on compliance improvement, strengthened audits, and enhanced taxpayer services for the next 12 months.

Exploring International Models for Fuel Inclusion:

Johri highlights that other countries have successfully included fuel and other demerit goods in their VAT or GST structures. By implementing a two-part tax structure, a GST portion can be levied while allowing for an additional non-VAT-able tax, such as excise duty or sales tax, to preserve revenue streams. This approach, similar to the taxation of tobacco products, provides a potential solution for including fuel under the GST regime without compromising revenue collection.

State Concerns and Potential Compensation:

States, particularly mineral-rich ones, express concerns about potential revenue losses if fuel is included under the GST. Johri suggests that addressing their concerns would require the involvement of the Finance Commission, which could consider modifying the devolution formula to provide additional compensation. As these states rely on mineral resources and have limited consumption bases, their specific circumstances need to be taken into account.

CBIC's Focus on Compliance Improvement:

Johri outlines the CBIC's agenda for the seventh year of GST implementation, which includes enhancing compliance through multiple strategies. The drive against fake billing and invoicing will continue, with efforts to identify and eliminate bogus units. The CBIC also plans to strengthen audits to ensure the quality of information submitted in returns and detect tax evasion. Additionally, the organization aims to enhance taxpayer services, focusing on grievance redressal and outreach programs.

Positive Impact of Compliance Measures:

The increased focus on compliance in the past two years has contributed to the rise in monthly GST collections, surpassing Rs 1.7 lakh crore in 2023-24 compared to Rs 1.2 lakh crore in 2021-22. The CBIC's efforts in compliance improvement and administrative measures have played a significant role in increasing collection efficiency and reducing misuse. These actions have contributed to tax revenue growth beyond the rate aligned with GDP growth.

Meeting Indirect Tax Revenue Targets:

Despite concerns about falling inflation affecting nominal GDP growth, Johri believes that the government is on track to meet the budgeted estimate for indirect tax mop-up. Barring unforeseen circumstances, the targets should be achievable, reflecting the overall support of indirect tax collections to tax revenues.

Vivek Johri's proposal to include fuel products under the GST regime by adopting international models presents a potential solution to address concerns raised by states. By implementing a two-part tax structure, the GST portion can be applied while preserving existing revenue streams through non-VAT-able taxes. The CBIC's focus on compliance improvement, strengthened audits, and enhanced taxpayer services aims to further enhance the efficiency and effectiveness of the GST system.