Among the many proposals mooted by the states’ Goods and Services Tax (GST) panel which await the finance ministry’s approval is exclusion of a few more commodities— coal, opium and narcotics — from the list of items to be taxed under the GST.
The empowered committee of state finance ministers, in a recent letter to the Centre and the states, has proposed that the constitutional amendment draft for GST be amended to include “coal, opium, Indian hemp and other narcotics drugs and narcotics, but not medicinal and toilet preparations containing these items” in the exempt list for GST. In the first draft, commodities like petroleum crude, high speed diesel, motor spirit, natural gas, aviation turbine fuel and alcohol were kept out of the taxable items for GST.
While the exclusion of coal from the list may make a difference to the revenue that may have to be foregone by the Centre and the states due to the exemptions, there is little revenue implication for opium and other narcotics that are grown and sold under strict government surveillance, without private party involvement.
Currently, coal attracts sales tax when traded in states and the amount is pocketed by the state governments. The Centre also levies a tax on coal production. In the last Budget, a tax of $1 per metric tonne was imposed on domestic and imported coal. The proceeds would be used to fund environment-friendly renewable emergy projects, in line with the policy focus to reduce the carbon intensity of the GDP.
The proposal made by the states’ GST panel is still under the consideration of the finance ministry. If the commodity — coal— is out of the GST ambit, the Centre will continue to tax it as it does now and the states will also earn from the state tax levied on coal trading.
The Centre and states met in Goa where they discussed the possibilities of introducing the GST soon. One proposal by the states was to start with an interim GST without the GST council and the dispute settlement authority, and instead, broaden the empowered committee’s scope to act like a council.