With fuel prices crossing record high figures, Finance Minister Nirmala Sitharaman on Monday said there is no proposal as of now to bring crude oil, petrol, diesel, jet fuel (ATF) and natural gas under the Goods and Services Tax (GST).
Upon the introduction of the GST on July 1, 2017, combining over a dozen central and state levies, five commodities – crude oil, natural gas, petrol, diesel, and aviation turbine fuel (ATF) – were kept out of its ambit due to the revenue dependence of the central and state governments on this sector, which meant that the central government continued to levy excise duty on them while state governments charged VAT. These taxes, with excise duty, in particular, have been raised periodically.
Although there has not been any dip in taxes, a spike in global oil prices on demand recovery has pushed petrol and diesel to an all-time high, leading to demand for them come under the GST.
“At present, there is no proposal to bring crude petroleum, petrol, diesel, ATF and natural gas under GST.”~ FM Nirmala Sitharaman, in a written reply to a question in the Lok Sabha
She added that the law prescribes that the GST Council shall recommend the date on which the goods and services tax be levied on petroleum crude, high-speed diesel, motor spirit (commonly known as petrol), natural gas and ATF.
“So far, the GST Council, in which the states are also represented, has not made any recommendation for inclusion of these goods under GST,” she underlined.
The Council may consider the issue of inclusion of these five petroleum products at a time it considers appropriate keeping in view all the relevant factors, including revenue implication, she added.
Including oil products in GST will not just help companies set off tax that they paid on input but will also bring about uniformity in taxation on the fuels in the country.
Sitharaman has in recent weeks talked of inclusion of fuel under GST as well as centre and states taking a joint call on cutting taxes to cushion consumers against the spike in retail prices.
To a separate question, Anurag Singh Thakur, Minister of State for Finance said that the excise duty on petrol was INR 19.98 per litre a year back and is INR 32.9 now. Similarly, on diesel, the excise duty has been raised from INR 15.83 to INR 31.8.
“The excise duty rates have been calibrated to generate resources for infrastructure and other developmental items of expenditure keeping in view the present fiscal position,” Mr Thakur said, giving reasons for raising the levy.
On the impact of higher fuel rates on general prices, he said ‘petrol for vehicle’ inflation has increased from 7.38 per cent in January 2020 to 12.53 per cent in January this year.
Similarly, he shared that ‘diesel for vehicle’ inflation has increased from 6.44 per cent in January last year to 12.79 per cent this year.
While talking about fuel pricing, Thakur said the prices of petroleum products in the country are benchmarked to international product prices.
“Generally, the price of petroleum products in the country are higher/lower than other countries due to a variety of factors, including prevailing tax regime and subsidy compensations by the respective Governments.”~Anurag Singh Thakur, Minister of State for Finance