Title : Should Petroleum be brought under GST regime
Date : Nov 10, 2021
Topic à Economy related issues:
- 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.
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.
Tags : petrol products, gst, government of India, state governments, finance ministry