Centre tells the Kerala High Court Petrol not under GST due to financial constraints

The Centre and the GST Council have maintained their argument before the Kerala High Court that petroleum items should not be included in the GST ambit, claiming that this was a “conscious decision” given that they generate significant revenue for both the Central and State governments.

In their counter-affidavit, the said authorities stated:

“It is respectfully submitted that it was a conscious decision of the GST Council to keep petroleum products outside the GST regime at this stage. These products yield significant revenue for both Centre and States.”

After the Court ordered them to present “genuine reasons” for not including petroleum goods in the scope of GST, they filed the counter-affidavit. This follows the Centre’s announcement that the exclusion was due to the pandemic. Following the developments, Kerala Pradesh Gandhi Darshanvedhi filed a petition challenging the GST council’s decision.

Nonetheless, the Centre has mentioned the pandemic as a rationale for its decision, stating that the Centre and States are providing stimulus in all areas to help the economy recover from Covid’s disruptions.

In addition, since post-crisis revenue generation is a difficult task, “tax revenues are required to ensure that socio-economic initiatives undertaken in the larger public interest are not adversely affected,” according to the affidavit filed by Senior Standing Counsel for the Central Board of Indirect Taxes and Customs PR Sreejith.

The case, filed by Advocate Arun B Varghese, claimed that “fragmented taxing practises” caused by varying tax rates levied by different state governments hampered the creation of a harmonised national market as envisioned by Article 279A(6) of the Indian Constitution.

The counter-affidavit questioned the petition’s maintainability because the petitioner’s prayer is to invalidate the GST Council’s judgement in order to enforce the terms of Article 279A(5) and related legislative measures. As a result, the Centre argued that the petition violates the theory of separation of powers.

It was further argued that the petitioner’s claim that citizens’ fundamental rights under Articles 14 and 21 are harmed is unsustainable.

“The government, in its wisdom, had decided to raise the duty in the public good, taking into account all relevant variables, including the necessity to mobilise resources amid severe fiscal constraints. Fiscal policy is influenced by a variety of circumstances, and it may or may not be bound by the fact that it causes hardship to those who must pay or bear taxes.”

The Centre requested that the petition be dismissed on these grounds.