New Delhi – To offer respite to the manufacturing industry finance minister Arun Jaitley minister has urged the states to drop the VAT rate on hydrocarbon. Oil, petrol, and diesel have not been included to GST.

This is one of the compromises which the state and the center have come up with. The tax that the state collects on petroleum earns near about 30% of the tax rate.

Arun Jaitley has asked the state CM’s to reduce the tax rate collected from the petroleum. The letter, which Jaitley has written to the state CM’s, talks about the worry which the manufacturers have raised. With the newly launched tax system, the manufactured products would be charged with GST while the petroleum would attract VAT. This leads to a situation where tax attracts tax. The tax credits which have been paid for the use of the raw material will not be used to balance the tax liability.

The pre-GST era has seen low VAT rate in some states on natural gas. This gas is used for manufacturing products, said a GST official. The official has also added that the finance minister has requested the states to lower the VAT rate on petroleum products.

Natural gas is used for various purposes including creating fertilizer and glass. Any increase in the tax rate might hinder the inflation. Such manufacturers have been looking for some suitable scheme to get the refund. However, a tax official has said that the council is not considering such proposals.