India: No GST on petrol, diesel in near future as Centre and states are not in favour

  • 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 top source said on 21 Aug 18.
  • When the GST was implemented in Jul 17, five petro-products – petrol, diesel, crude oil, natural gas, and aviation turbine fuel (ATF) were kept out of its purview for the time being.
  • Though there have been talks in the industry and by some ministers, including by Oil Minister Dharmendra Pradhan and Road Transport Minister Nitin Gadkari, for the need to bring them under GST at the earliest to deal with volatility in prices, there is no immediate plans on the anvil to do so, the source, who wished not to be named, said.
  • The Union finance ministry, he said, has not mooted any proposal to bring petrol and diesel or even natural gas under GST but took up the issue at the last GST Council meeting on 4 Aug 18 based on media reports.
  • If the two fuels are put under GST, the Centre will have to let go INR200bn in input tax credit it currently pockets by keeping petrol, diesel, natural gas, jet fuel and crude oil out of the GST regime.
  • States, on the other hand, want to keep a revenue tool in their hand to meet any contingency like the floods in Kerala, he said.
  • The Centre currently levies a total of INR19.48 per litre of excise duty on petrol and INR 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 39.1% on petrol, while Telangana levies highest VAT of 26% on diesel. Delhi charges a VAT of 27% on petrol and 17.2% on diesel. The total tax incidence on petrol comes to 45-50% and on diesel, it is 35-40%.
  • Under GST, the total incidence of taxation on a particular good or a service has been kept at the same level as the sum total of central and state levies by fitting them into one of four GST slabs.
  • For petrol and diesel, the total incidence of present taxation is already beyond the peak rate and if the tax rate was to be kept at just 28% it will result in a big loss of revenue to both centre and states.
  • GST has been spoken of as a panacea for high fuel prices but there seems to be no consensus on bringing petro-products under the new regime in immediate future, he 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 source justified high excise duty on the fuel saying the earning from the same is used to pay for unpaid oil subsidy bill left by the previous UPA government as well as fund developmental needs.
  • The Central government had raised excise duty on petrol by INR11.77 a litre and that on diesel by INR13.47 a litre in nine instalments between Nov 14 and Jan 16 to shore up finances as global oil prices fell, but then cut the tax just once in Oct 17 by INR2 a litre.

External Link: https://economictimes.indiatimes.com/news/economy/policy/no-gst-on-petrol-diesel-in-near-future-as-centre-states-not-in-favour/articleshow/65492565.cms

21-Aug-2018


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