Tax on fuel the last vestige of State's right to manage revenues, says TN Minister

Addressing the GST Council led by Union Finance Minister Nirmala Sitharaman, Rajan raised concerns that the Centre has been increasing tax on petrol and diesel between 500 percent and 1,000 percent since 2014.

"We are of the general opinion that the State taxation of petrol and diesel remains one of the last vestiges of any State's right to manage their own revenues since the advent of GST stripped away most of the small range of rights originally written to the Constitution. We are reluctant to give up any of these few remaining rights and so are fundamentally opposed to bringing these products into the ambit of GST," Rajan said.

The Union government, changing the mix of taxation from over 90 percent excise and less than 10 percent cess and surcharge to about four percent of total Union taxation of these products as excise today, have deprived the States of huge amounts of revenue while increasing the Centre's revenue from the products by trillions of rupees (lakhs of crores) annually, he said.

"Under these circumstances, we feel it will be a grave, potentially fatal, injustice to shift State taxation of petrol and diesel away from levels determined solely by each State to the ambit of GST," he said.

Rajan, however, said the State government would reconsider its decision if the Centre were to completely drop the levy of all cess and surcharge on such products.

The Minister described the Fitment Committee's recommendation of attracting an 18 percent GST on coconut oil when packed and sold in a unit container less than 1 liter was in bad faith and was against the interest of Tamil Nadu which was one of the largest producers of coconuts and coconut oil.

The Fitment Committee has recommended that the coconut oil when packed and sold in a unit container of less than 1,000 milliliters may be classified as hair oil attracting a GST rate of 18 percent irrespective of its actual end-use," he said.

"We find this recommendation lacking in either logic or fairness. We will go so far as to consider this decision to have been made with bad faith intent against the interest of Tamil Nadu," he said.

"How can you classify something which is clearly edible as effectively non-edible for the sake of levying GST? How do you decide on one whole liter as the cut-off for even considering whether something is intended for edible use or not. It is an arbitrary cut-off point, bereft of human compassion and basic logic," he said.

Holding that not many poor families buy cooking oil in units more than one liter, he said why should coconut oil only be singled out to other edible oils with multiple uses, such as mustard oil or gingelly oil?

"Are they not considered because their origin is not largely contained to the southern states like Tamil Nadu," he said and asked why South Indian oil is being discriminated against while oil imported gets five percent rate".

"We find this proposal to be anti-poor, anti-southern states," he said. Lakhs of coconut farmers of Tamil Nadu and other States would never forget this outcome where this GST Council to perpetrate such gross injustice against them, he added.