Is mammoth fall in petrol, diesel prices in the offing? All eyes on GST Council

The record prices of petrol and diesel may perhaps see a big fall in the times to come with Goods and Services Tax (GST) Council expected to discuss the possibility of bringing fuel prices under its ambit when it meets in Lucknow on Friday. As per a report in LiveHindustan, such a move may bring down the per-litre cost of petrol and diesel to ₹75 and ₹68, respectively.

(Read this story in Hindi here)

Petrol and diesel prices in the country have been at record levels and are being sold for well over ₹100 per litre in many parts. The price hikes have been regular since May even if there was a pause in the weeks prior. A number of reasons have been assigned for such hikes - from price of crude oil rising in global markets to revenue requirements to fund welfare schemes, and more. Official data reveals that the petroleum sector contributed ₹3,71,726 crore central excise revenue in 2020-21, and ₹2,02,937 crore state levies or value-added tax (VAT).

There has also been a growing demand to bring fuel prices under the ambit of GST which could lead to a rationalization of taxes. Livehindustan now reports that the matter will be up for discussion when the GST Council meets, as per direction of the Kerala High Court. The HC had in June issued directions to decide on including both fuels under GST.

The issues of rising fuel costs as well as the question over fuel prices under GST have caused political bickering between parties. BJP member and former Bihar finance minister Sushil Modi, for instance, had dared the opposition to raise the matter in the GST Council, adding that no chief minister or finance minister from non-NDA ruled states has opposed any decision of the GST Council. He went on to predict that it won't be possible to include fuel prices under GST for another eight to 10 years. (Read more here)

Congress, however, has cited that prices must be reduced because of the prevailing rates of international crude. “In the last six years, the excise duty on petrol and diesel has been increased on petrol by an additional ₹23.78 per litre and on diesel by an additional ₹28.37. This translates into a 258 per cent increase in excise on petrol and 820 per cent hike in excise duty on diesel," party spokesperson Randeep Surjewala had previously said. (Read more here)

Political contests aside, many economic experts do believe that record fuel prices do not bode well for the economy and may cause inflationary pressures.