Govt. not in favour of bringing fuel under GST amid potential revenue losses

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Amid fear of heavy revenue loss, the Central government and the state governments are not in favour of bringing petrol and diesel under the Goods and Services Tax (GST) bracket in the near future. According to certain reports, it is estimated that the central government may have to forgo up to Rs.20,000 crore in input tax credit if all the petroleum products are brought under the GST purview.

GST

As of now, the Central government imposes an excise duty of Rs.15.33/litre on diesel and Rs.19.48/litre on petrol. In addition to this, the state governments are at liberty to levy Value Added Tax (VAT) at their will. In India, the VAT on petrol is the highest in Mumbai at 39.12%. Andaman and Nicobar Islands, on the other hand, charges the lowest VAT on fuel at 6%.

At present, the total amount of tax comes to nearly 45% to 50% on the price of petrol and 35% to 40% on the price of diesel. Since the maximum GST slab in India is only 28%, bringing in petrol and diesel under the GST bracket will substantially reduce the price of fuel throughout the country.

While this could be beneficial for citizens, the government may have to lose a considerable part of their tax revenues. As of today (August 22), petrol costs Rs.77.63 per litre and diesel costs Rs.69.15 per litre in New Delhi.

When the GST was implemented all over the country in July 2017 under the ‘one-nation, one-tax’ principle, five major petroleum products including petrol, diesel, natural gas, crude oil, and aviation turbine fuel were kept out of the GST ambit due to the possibility of heavy loss in tax revenue.

In the previous GST Council meeting, the Council discussed the possibility of bringing fuel under the tax bracket. However, sources now indicate that the Union Finance Ministry currently has no plan to bring it under GST.

Source: Moneycontrol

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