The Central government has declared the new notification on Bringing petrol and diesel under GST will not lower fuel oil prices by itself, unless both Union and state governments are inclined to take deep revenue cuts. In this article, we will discuss GST on Fuel and its significance.
Know About GST
GST is an indirect tax inaugurated because of the necessity to replace numerous indirect taxes in India, namely VAT, service taxes, excise duties, etc. The Parliament of India passed the GST or the Goods and Services Tax Act on 29th March 2017, and it came into effect on 1st July 2017.
GST on Fuel
The rise in global crude prices after August 2020 has led to an immediate rise in fuel prices across the country, which has provoked a demand for including petrol and diesel under GST. It is an enormous misnomer that merely including these commodities under GST would lead to a lowering of pump prices since the maximum rate on these products would be capped at 28 per cent.
While a decision to subsume petrol and diesel in GST would eventually lie with the GST Council, prices can be lessened only by lowering the revenue that currently accrues to both the Centre and the states on the sale of these commodities, whether under GST or outside it.
Further Notification by Central Government
Further, the Union and state levies put together account for approximately 55 per cent and 52 per cent of the retail price of petrol and diesel respectively; these work out to around 135 per cent and 116 per cent of the base rates of the two commodities respectively.
Moreover, it is worth remarking that of the total central levies on petrol and diesel, Rs 1.40 per litre and Rs 1.80 per litre is the essential excise duty for the two fuels, and Rs 11 per litre and Rs 18 per litre is the special following excise duty.
The persisting portion of Rs 18 per litre in both cases is the Road and Infrastructure Cess and Rs 2.50 per litre and Rs 4 per litre is the Agriculture Infrastructure and Development Cess which are conserved by the Centre, to be utilized only towards road and agricultural infrastructure development.
Thus, getting the aforesaid petro-commodities under GST is not within the reach of the central government alone — a vast prevalence of states too would have to come on board. Regardless, bringing them under GST would involve taking a call on a very tricky issue.
Download E-Startup Mobile App and Never miss the freshest updates narrating to your business.