Differential GST rates on petrol, diesel engines challenged in Delhi High Court

Differential GST rates on petrol, diesel engines challenged in Delhi High Court

The Delhi High Court last Friday issued notice to the Centre in a plea by Honda Siel Power Products Limited, challenging the constitutional validity of imposing a higher rate of Goods and Services Tax (GST) on petrol/kerosene engines than diesel engines.

After the introduction of the GST regime, it was recommended that both the types of engines would be taxed at the rate of 28%. However, pursuant to a meeting held on June 11 this year, the GST Council reduced the tax on diesel engines to 12%, while that on petrol/kerosene engines was kept the same, at 28% .

The litigation team of PDS Legal led by Partner Tarun Gulati, along with Senior Principal Associate Sparsh Bhargava and Senior Associate Anupam Mishra, appeared on behalf of the petitioner. It was submitted that the differential tax was arbitrary and violative of Articles 14, 19(1)(g) and 21 of the Constitution.

It was contended by the petitioners that,

“The classification of fixed speed diesel engines of power not exceeding 15 HP at a lower tax rate slab of 12% while keeping the petrol/kerosene engine manufactured by the petitioner at a tax rate slab of 28% is completely discriminatory and violative of Article 14 of the Constitution since both these products are commercial substitutes of each other and are used for the purposes of providing power output to power driven products such as water pumps, lawnmowers, backpack sprayers, tillers etc.”    

It was further argued by the petitioner company that studies undertaken by expert bodies have indicated that emissions from diesel engines are carcinogenic and also cause immense pollution. The products of Honda Siel, on the other hand, it was submitted, use cleaner fuel. Thus, there is no rational basis for classifying the products of the petitioner at a higher rate while incentivizing diesel engines.

The Division Bench of Justices S Ravindra Bhat and Sanjeev Sachdeva, while issuing notice to the Centre, directed the GST Council to consider the petitioner’s pending representations about the differential tax rates.

The matter will be heard on February 12 next year.

Source” Bar&Bench