Petrol, diesel under GST? Key meeting today may decide taxes on fuel prices

After most parts of the country witnessed massive fuel price hike since the beginning of the year, taking prices of petrol and diesel above ₹100 mark at several places, the GST Council will meet today and may discuss proposal to bring both fuel under its tax regime. However, it remains to be seen if states and Centre agree to compromise on one of their key earning sources to provide much needed relief to consumers.

The demand to bring petrol and diesel under the GST tax regime has been longstanding, as many feel it would rationalise the tax structure on both fuel. Even if they are placed at the highest slab of 28 per cent, there will be a significant reduction in prices.

According to reports, the Centre is likely to earn ₹1.87 lakh crore in the current financial year after additional cess and surcharges implemented twice since March this year. Currently, the Centre levies excise duties of ₹32.80 per litre on petrol and ₹31.80 on diesel. On the other hand, the states also levy duties on fuel sold within its boundaries in the form of Value Added Tax (VAT) and it varies from state to state.

The dual taxing on fuel shoots up the prices to almost double of what it should cost straight out of a refinery. The taxes and duties imposed by the central and state governments make up for almost 60 per cent of the retail prices. Since May last year, petrol and diesel prices have gone up by more than ₹30 per litre. If petrol and diesel are brought under GST, not only the taxing will be rationalised, the share of income will be split equally between states and the Centre.

Differences in opinion have already surfaced regarding the change in tax structure on fuel. Ahead of the GST Council meeting, Maharashtra Deputy Chief Minister Ajit Pawar has said his state government was against any move to encroach upon its rights to levy taxes. Chhattisgarh Chief Minister Bhupesh Bhaghel backs the proposal, but is critical of Centre’s delay in paying state’s share. He said, “It is good if they bring fuel prices under GST, crude oil prices are going down internationally, but increasing in India...But the concern is that as per Act, money belonging to the states is also not given to us. The Centre doesn't abide by the Act."

It remains to be seen if there is any consensus on the matter if GST Council chooses to pick the proposal for discussion in today's meeting.