Prepare IAS Coaching
Current Affairs
Title : Should Petroleum be brought under GST regime
Date : Nov 10, 2021
Description :
GS III
Topic à Economy related issues:
- Why in News:
- The Central Government has recently reduced the excise duty on petrol by Rs 5 per litre and on diesel by Rs 10 per litre.
- Taking cue from the same, many state governments have also reduced the VAT they charge on petrol and diesel by around Rs 5 to Rs 12 per litre.
- How much do we pay for petrol and diesel:
- Union and state government taxes include about 55 percent and 52 percent of the retail price of petrol and diesel respectively.
- These account for approximately 135 percent and 116 percent of the base prices of two products respectively.
- The central levy of petrol and diesel accounts for about 36 percent of the retail price and the state share is estimated at 20 percent (diesel) to 28 percent (petrol).
- Including fossil fuels/petroleum in the GST:
- GST Constitution Amendment Bill 122 of 2014 adopted a delayed choice option.
- Under the delayed choice process, petroleum products will be included in the GST from the date on which the council may recommend.
- Accordingly, sections 9 (2) and 5 (2) of the CGST / SGST Act and the IGST Act respectively, clearly provide for GST tax on these products from the date on which the Council may recommend.
- Therefore, keeping the petroleum products under the GST is not easy to accomplish by central government alone.
- How much will be the revenue loss if petroleum is included under GST:
- The 28% GST tax on basic value will cost about Rs 5.40 a litre on petrol and Rs 5.45 per litre on diesel.
- Current taxes are at least Rs 32.90 per litre on petrol and Rs 31.80 litre per lire on diesel.
- However, bringing petroleum under the GST will reduce petrol and diesel prices by around Rs 55 a litre.
- This will result in an estimated loss of Rs 3 lakh crore due to petrol and Rs 1.1 lakh crore due to diesel.
- Conclusion:
Clearly, importing petroleum products under the GST will not reduce oil prices alone, unless the Union and state governments are willing to significantly reduce their revenues.