The recent surge in the prices of petrol and diesel is burning a hole in the pockets of the common man. For India Inc. too, rising freight costs threaten operating margins. In that context, the meeting of the GST (Goods and Services Tax) Council in Lucknow on Friday is important.
A widely held expectation is that the council will likely discuss bringing auto fuels under its purview. Such a move would lead to a steep fall in the consumer prices of auto fuels.
However, tax experts say that the experience of the previous GST meetings shows that taking a firm decision on this contentious matter is easier said than done.
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“We do not expect any meaningful decision regarding this matter in Friday’s meeting. We may have some recommendations or a new committee may be constituted; Nothing further,” said a tax expert at a foreign accounting firm, requesting anonymity.
“It is a politically sensitive issue which will have a huge impact on the fiscal authority and revenue generation of the states if GST is to be imposed on them. These items are major revenue generators for the states, so bringing them together with the Center is a lengthy task,” the person mentioned earlier added.
The imposition of GST on petroleum products has been a matter of dispute between the states and the central government since the implementation of GST in 2017. This is because each state has its own tax structure for taxing these products. Due to this, the current tax structure on petroleum products has given rise to multiple taxes, making the prices in India among the highest in the world. At present, petrol and diesel are being sold around ₹101 per liter and around ₹88 per liter respectively in Delhi.
Petroleum products are taxed taking into account the crude oil price, transportation charges, dealer commission and flat excise duty levied by the central government.
“Shifting petroleum fuel and natural gas, which are currently under VAT (value-added tax), may take time and several rounds of discussions to arrive at a revenue-neutral GST rate, including Rates may exceed 28%. for petrol and diesel (considering higher excise and VAT rates) and 18%+ for gas (considering VAT rates of 5-25% across states),” Nirmal Bang Securities Ltd reported on September 16. said in.
In simple words, states where the tax rate on petroleum products exceeds 28%, the highest GST slab, are bound to lose some revenue.
Tax experts said if a new tax bracket is introduced to tax only petroleum products, it would defeat the prime GST objective of uniformity in taxes.
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