Union Govt to Kerala High Court: Petrol/Diesel, not under GST, it brings in revenue for Centre, States

Union Govt to Kerala High Court: Petrol/Diesel, not under GST, it brings in revenue for Centre, States

"Fiscal policy is a function of several factors and may not be constrained by the fact that it causes hardship to persons who have to pay or suffer taxes," the Centre said in its counter affidavit.

The Central government and the Goods and Services Tax (GST) Council have secured the decision to not include petrol and diesel within the tax domain. It was a sensible decision as these products produce substantial revenues for the Central and State governments.

The High Court asked them to give "unpretentious reasons" for its decision to keep petroleum products outside the ambit of GST. A counter affidavit to this effect was filed on behalf of the Central government and the GST Council before the Kerala High Court after the High Court asked proper reason.

"It is respectfully submitted that it was a sensible decision of the GST Council to keep petroleum products outside the GST regime at this stage. These products bring in significant revenue for both Centre and States," the affidavit stated.

However, the government also restated its dependence on the pandemic as a reason for its decision. The Centre and States are extending stimuli in all areas to recover the economy from the distractions caused by Covid.

Since post-crisis revenue generation is a challenging task, "tax revenues are required to confirm that socio-economic advantages undertaken in larger public interest are not unfavourably affected," the affidavit emphasized.

In response to Public Interest Litigation (PIL), Senior Standing Counsel for the Central Board of Indirect Taxes and Customs, advocate, PR Sreejith, filed that the affidavit has challenged the decision taken by the GST Council in its 45th meeting that presently it was incorrect to bring petroleum products under GST.

"There is no application of mind coming in such a conclusion. Neither there is any reasoning as to why the present stage is ripe enough to take such decision when the rate of petrol and diesel is rising regularly," the plea had said.

According to the PIL petition, filed through advocate Arun B Varghese, it had pointed out that the recent hike in petrol and diesel prices has an undulated effect. It not only unpleasantly affects economic steadiness but also the lives of the common people.

It was opposed that the non-inclusion of petrol and diesel under the GST regime are violative of Articles 14 and 21 of the Constitution.

Moreover, it was debated that the "fragmented taxing policies" due to different rates of tax levied by different State governments deters the achievement of a consistent national market as foreseen under Article 279A(6) of the Constitution of India.

The counter affidavit assaulted the maintainability of the petition as the prayer of the petitioner seeks to supress the decision of the GST Council as it seeks to "enforce the provisions of Article 279A(5) and associated legislative actions".

Therefore, "the petition also goes against the doctrine of separation of powers", the Central government submitted. The contention of the petitioner that the fundamental rights of citizens under Articles 14 and 21 are affected are not supportable, it was further contended.

"The Government, in its own wisdom, considering all relevant factors, including the need for mobilising resources amid serious fiscal constraint, had taken the decision to raise the duty in public interest. Fiscal policy is a function of several factors and may not be constrained by the fact that it causes hardship to persons who have to pay or suffer taxes," the affidavit said.

On these, among other grounds, the Central government constrained for release of the petition.