No GST on petrol, diesel in the near future

No GST on petrol, diesel in the near future

New Delhi: Petrol and diesel will not come under the purview of Goods and Services Tax (GST) in the immediate future as neither the central government nor any of the states is in favour on fears of heavy revenue loss, a person familiar with the matter said today. When the “one nation, one tax” regime was implemented on 1 July 2017, five petroleum products—petrol, diesel, crude oil, natural gas and aviation turbine fuel—were kept out of the GST purview.

Though there have been talks in the industry and by some ministers, including by Dharmendra Pradhan and Nitin Gadkari, for GST on petrol and diesel at the earliest to deal with crude price volatility, there is no immediate plans on the anvil to do so, the person quoted above said, requesting anonymity.

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The Union finance ministry, this person said, has not mooted any proposal for GST on petrol and diesel but took up the issue at the 4 August GST Council meeting.

“All states were opposed to the idea,” the person said.

If the two fuels are put under GST, the Centre will have to let go ₹ 20,000 crore input tax credit it currently pockets by keeping petrol, diesel, natural gas, jet fuel and crude oil out of GST.

States, on the other hand, want to keep a revenue tool in their hand to meet any contingency like the floods in Kerala, the person said.

More importantly, GST being an ad valorem levy—charged as a percentage on ex-factory price—would have a cascading impact on retail prices whenever refinery gate prices are increased because of a rise benchmark international oil prices. The inverse would also be true.

The Centre currently levies a total of ₹ 19.48 per litre of excise duty on petrol and ₹ 15.33 per litre on diesel. On top of this, states levy value added tax (VAT)—the lowest being in Andaman and Nicobar Islands where a 6% sales tax is charged on both the fuel. Mumbai has the highest VAT of 39.12% on petrol, while Telangana levies highest VAT of 26% on diesel.

Delhi charges a VAT of 27% on petrol and 17.24% on diesel.

The total tax incidence on petrol comes to 45-50% and on diesel, it is 35-40%.

Under GST, the total tax incidence on a particular good or a service has been kept at the same level as the sum total of central and state levies before 1 July 2017. This was done by fitting them into one of the four GST tax slabs of 5%, 12%, 18% and 28%.

After hitting an all-time high of ₹ 78.43 a litre for petrol and ₹ 69.31 for diesel on 29 May, rates have marginally fallen during the subsequent days on softening in international oil prices and rupee strengthening against the US dollar.

Petrol costs ₹ 77.49 a litre and diesel ₹ 69.04 in Delhi today.

Source:- livemint



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