The GST Council may propose taxing petrol, diesel, and other petroleum goods under a unified national GST system on Friday, a move that would likely necessitate significant compromises on the part of both the central and state governments.
The GST Council will meet in person for the first time in 20 months. The most recent such meeting took place on December 18, 2019, prior to the COVID-19-induced lockdowns.
Currently, each state has its own fuel tax, while the federal government collects its own charges and cess. Petrol prices have topped Rs 100 per litre in some parts of the country, raising complaints about the excessive taxation that is making fuels more expensive.
How will the petrol rates come down under GST?
The amount for dealers comes out to Rs 41.10 if the basic price of petrol is Rs 40.78, including freight charges. To this add Rs 32.90 excise duty, Rs 3.84 dealer commission, and Rs 23.35 in VAT on dealer commission. The entire selling price would be Rs 101.19.
VAT and excise tax will not be applicable if the prices fall under the GST system; instead, a 28 percent GST will be paid on the base price, which is roughly Rs 11.50. With a dealer commission of Rs 3.84, the price of petrol will be Rs 56.44.
In Karnataka, a tax of Rs 59 is levied, consisting of Rs 32.9 in central additional excise duty (AED) and 35% in state sales tax (on the amount of Rs 41.8) and AED. The current retail pricing of Rs 104.7 per litre will be reduced to Rs 59.2 under GST. Diesel will be reduced in price from Rs 94 to Rs 50 per litre.
Why States are against GST on petrol and diesel?
Nearly half of the retail selling price of petrol and diesel is made up of central excise and state VAT (Value Added Tax). Bringing them under the Goods and Services Tax (GST) will have an impact on state income generating.
According to tax experts, bringing oil items under GST will be a difficult issue for both the Centre and the states because both stand to lose. States will lose money even if a product like natural gas is brought under GST because taxing local production and import of the fuel earns a lot of money.
Kerala Finance Minister K N Balagopal told PTI that the state will vigorously reject any proposal to bring gasoline and diesel under the GST framework.
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GST on petrol and diesel
According to him, bringing petrol and diesel under the GST regime will cost the state Rs 8,000 crore per year.
The price of petrol and diesel is likely to drop dramatically if the meeting's approval is granted. According to sources, petrol prices could drop to Rs75 per litre, while diesel prices could drop to Rs 68 per litre. The tax's cascading effect will be eliminated if it is brought under the GST scheme.