Goods Excluded from GST and Covered Under VAT

• Alcohol for human consumption remains outside GST and continues to be taxed under State VAT laws
  
• Petroleum crude, motor spirit (petrol), high-speed diesel (HSD), natural gas, and aviation turbine fuel (ATF) are still under VAT
  
• These items are constitutionally allowed to be taxed under state VAT laws until notified for inclusion in GST
  
• The revenue from VAT on these items goes directly to state governments, maintaining their fiscal autonomy
  
• States apply their own VAT rates, which vary across regions, on these products
  

Alcohol for Human Consumption

• Alcoholic beverages for human use are entirely excluded from GST by constitutional mandate
  
• States have full authority to levy excise duty, VAT, and other local taxes on liquor
  
• This has led to high variation in liquor prices across states due to differing VAT rates
  
• Manufacturers and retailers of liquor must continue to comply with VAT registration, return filing, and tax payment
  
• Liquor meant for industrial or medicinal use may fall under GST, but potable alcohol is strictly VAT-governed
  

Petroleum Products Still under VAT

• These five petroleum items are outside GST: petrol, diesel, crude oil, natural gas, and ATF
  
• Each state levies VAT or sales tax on top of central excise for these fuels
  
• GST is applicable to lubricants, LPG (domestic and commercial), kerosene, and fuel oils, but not on the five excluded items
  
• Input tax credit under GST is not available on VAT-paid petroleum purchases, creating credit blockages
  
• The GST Council may bring these items under GST in the future, subject to political and fiscal consensus
  

Tobacco and Its Products

• Tobacco and tobacco products are subject to both GST and Central Excise Duty, but not VAT
  
• However, states may still levy VAT on certain types of chewing tobacco or unmanufactured tobacco, depending on the state law
  
• The dual taxation of GST and excise is unique to tobacco products
  
• Retailers and manufacturers must comply with both GST and older excise/VAT requirements where applicable
  
• This makes tobacco one of the most heavily taxed consumer goods in India
  

State Variations and Compliance Implications

• The VAT rates on fuels and alcohol differ significantly across states (e.g., petrol VAT ranges from 20% to 35%)
  
• Businesses dealing in both GST and VAT goods must maintain dual tax compliance systems
  
• States continue to update their VAT laws to adjust rates or procedures for non-GST goods
  
• Transitional provisions under GST do not apply to VAT goods; their taxation follows pre-GST norms
  
• Any changes to bring excluded goods under GST require a constitutional amendment or GST Council consensus