What if petrol and diesel are included under GST

What If Petrol and Diesel Come Under GST Regime in India? [2021]

Since the introduction of GST in 2017, the debate for the inclusion of petroleum products like diesel, petrol, natural gas, crude oil has been ongoing.

The gravity of the debate increased drastically when the price of these petroleum products reached a value that people did not think of before.
Petroleum products play an important role in determining the price of other consumer good and services. Many experts expressed their opinion on the inclusion and exclusion of petroleum product under the ambit of  GST.


What is the government’s stance on the inclusion and exclusion of Petrol and Diesel under GST?

The government has not taken any steps about it.  In a written reply in Lok Sabha Finance Minister, Nirmala Sitaraman said ” The GST council has not made any recommendation for inclusion of these goods under GST. The council may consider the issue of inclusion of these products at an appropriate time keeping in view the relevant factors including revenue implications.”

Viability for Indian Government to include Petrol and Diesel under GST

  1. Now Central government and state government put the different tax on petroleum product that is why the ultimate price to the consumer is so high. Even if they are included under GST and put under the slab of 28%, the highest rate, even then the final price to the consumer would be less.
  1. This will reduce the government’s revenue collection. Most of the state didn’t agree to include petroleum product under GST, as the state collects a good amount as tax.
  1. Those companies use petroleum product as input may claim the input tax credit when the product will be included under GST.

Challenges for Indian Government to include Petrol and Diesel under GST

  1. States put different VAT on these products, if they are taken under a specific slab of GST, the price in some state will rise and the price at some state will be less. According to one of the official, it is said that “There is no pure GST on petrol and diesel anywhere in the world and so in India too it will have to be a combination of GST and VAT.”

2. The revenue collection of the centre, as well as states, will be reduced, also, states will lose their authority over petroleum products. Presently, 60% tax is being collected on petroleum products by the Central and state governments. If petroleum products are brought under the GST, it would result in a shortfall of Rs 2 lakh crore to Rs 2.5 lakh crore to both Centre and stat

3. Do You Know How Much Tax You Pay On Your Fuel?

You will be surprised to know that the basic price of oil is only Rs.26.34/L (As per the report of Petroleum Planning and Analysis Cell). The rest is taxes, excise duty, etc. You have to pay different taxes on fuel that are:

  • Raw oil tax
  • Refinery tax
  • Excise Duty (imposed by central Govt.)
  • Dealer Commission
  • VAT (imposed by State Govt.)
  • Road Development Cess (imposed by State and Center Govt.)
  • Other Cess (imposed by State and Center Govt.)

Conclusion

Government has to impose approximately 280% of tax to earn the same revenue that is impossible.

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