Power ministry contemplates to bring electricity under GST ambit

New Delhi, 31 Dec (KNN) The power ministry has told the finance ministry it favours bringing electricity under the goods and services tax, two government officials aware of the development said, outlining a proposal that could help reduce electricity tariff for consumers as reported by mint.

Electricity costs are a substantial component of manufacturing expenses, and any reduction will help the government’s Make in India push, being rolled out through the production linked incentive scheme.

Apart from electricity currently, petrol, diesel, jet fuel, tobacco and land do not fall in the ambit of the indirect tax that came into effect in 2017.

Federation of Indian Micro and Small & Medium Enterprises (FISME) has been demanding of bringing electricity in ambit of  GST for a long time.

“The move will plug theft and malpractices in Electricity Boards as the entire chain of GST will be established,” says FISME. 

Further any such decision will have to be taken by the GST Council. Under the present dispensation for electricity, cross utilization of tax credits is not possible, which means its inclusion will make the sector tax efficient and reduce the tax burden. 

“For GST matters, the GST Council takes the decision, not the finance ministry.” said one of the government officials cited above.

GST related legislative proposals are first examined by a law committee of central and state officials before the Council considers them.

Experts said the proposal would relieve manufacturers, large service providers, housing project developers, and consumers. At present, tax on electricity varies from state to state and for classes of consumers, such as domestic and commercial.

“Since revenue from electricity duty to states is not as high as that in respect of petroleum products, bringing it under GST may also set tone for eventually subsuming crude oil and select petroleum products into GST,” said M.S. Mani, partner at Deloitte India.