The much talked about and speculative issue may finally reach a conclusion on Friday, when the 45th GST Council See you in Lucknow.
GST Council will meet for the first time in 20 months. After December 18, 2019, all the meetings of the GST Council were held in virtual mode.
A government source told the Times of India ahead of the crucial meeting of the GST Council on Friday, “We are not saying that we should bring petrol and diesel under GST immediately, we are basically asking the states to suggest a timeline. are saying.”
When GST was introduced in July 2017, five items — crude oil, natural gas, petrol, diesel and aviation turbine fuel (ATF) — were kept out of the purview of GST, reducing the revenue dependence of the central and state governments on them. Seeing it. .
Current price of petrol, diesel
As demand improves, in spike global oil prices pushed the prices of petrol and diesel to an all-time high, prompting demands to bring it under the GST.
Fuel prices are hovering at record highs due to 41 increase in its retail rates since April this year.
However, there has been no revision in the prices of petrol and diesel for the last 11 days as the Oil Marketing Companies (OMCs) are tracking global oil prices.
Accordingly, the cost of one liter of petrol in Delhi is Rs 101.19 and that of diesel is Rs 88.62.
Similarly, petrol price in Mumbai, Chennai and Kolkata remained unchanged at Rs 107.26, Rs 98.96, Rs 101.62 per liter respectively.
Diesel prices also remained unchanged. In Delhi, Mumbai, Chennai and Kolkata, the fuel was sold at Rs 88.62, Rs 96.19, Rs 93.26 and Rs 91.71 per liter respectively.
There will be no large-scale change in prices or some respite from cuts in the coming days as global oil is expected to soften again.
Oil cartel OPEC and its allies have agreed to gradually increase production levels to check price increases.
How will the prices change after GST?
If the GST Council indeed decides to cover fuel prices under its regime, all states are likely to have a maximum tax of 28 per cent on the base price of petrol, diesel.
This means that the different rates of excise duty and VAT levied by the Center and states on fuel prices will be replaced by a uniform GST rate across the country.
At present, the base price of petrol in Delhi is Rs 40.78 and inclusive of freight charges, this amount for dealers is Rs 41.10. According to the IndianOil website, this is our base price for petrol in Delhi.
To this we add excise duty of Rs 32.90, dealer commission Rs 3.84 and VAT on dealer commission Rs 23.35. Calculating the total we get the retail selling price of petrol in Delhi which is Rs 101.19.
Now, if prices start to be regulated under the GST regime, this Excise Duty (which is the Centre’s share) and VAT (State’s share) will be abolished and 28 per cent GST will be levied on the base price which is the front Comes. 11.50 Rs. To this we will add the dealer commission of Rs 3.84 and our retail price of petrol will come to Rs 56.44.
Similarly, according to IndianOil’s website, Rs 41.27 is charged from dealers in Delhi for diesel. If we calculate according to the new arrangement, the price will come down to Rs 55.41 from the current Rs 88.62.
Similarly, a liter of petrol in Karnataka currently attracts Rs 59 – Rs 32.9 central additional excise duty (AED) and 35 per cent state sales tax on the base price (Rs 41.8) and the sum of the AED. Under GST, the retail rate will be reduced to Rs 59.2 (including dealer commission of Rs 3) from the current Rs 104.7 per litre. Diesel price will be reduced from Rs 94 per liter to Rs 50.
Similar scenes can be seen across the states.
impact on government revenue
Given the revenue dependence of the central and state governments on the tax collected from the sale of petrol, it will be a tough call for the GST Council.
Central Excise Duty and State VAT (Value Added Tax) account for almost half of the retail selling price of petrol and diesel. Bringing them under GST will affect the revenue generation for the states.
This 28 per cent tax amount on pump prices will be shared equally between the Center and the states.
The Centre’s tax collection from petrol and diesel grew by 88 per cent to over Rs 3 lakh crore in 2020-21, despite lower sales due to the pandemic.
The Center had raised excise duty on petrol by Rs 13 per liter and on diesel by Rs 16 per liter between March-end and May 2020, when oil prices crashed due to the pandemic.
As a result, collection from diesel more than doubled to Rs 2.3 lakh crore from Rs 1,12,032 crore in 2019-20. Petrol mop-ups rose 53 per cent to over Rs 1 lakh crore in the pre-pandemic fiscal, the government had informed the Lok Sabha earlier this year.
Therefore, the states – which currently have the largest share of tax revenue – will suffer the biggest loss if the system shifts to GST.
Why are states against the inclusion of fuel under GST?
Both the Center and the states collectively collect over Rs 5 lakh crore tax annually on petroleum products. Bringing petrol and diesel under the GST regime will not be easy as the states will collectively suffer an annual revenue loss of Rs 2 lakh crore, BJP leader Sushil Modi had told the Rajya Sabha while participating in the discussion on the Finance Bill 2021.
The speculation of GST on petroleum products has already attracted protests from some states.
Maharashtra Deputy Chief Minister Ajit Pawar said the state government was against any move to encroach on its rights to levy taxes and would give its views in the GST Council meeting.
“We are yet to get Rs 30,000 crore to Rs 32,000 crore of our share of GST refund. Apart from excise duty and stamp duty, the largest pool of revenue for the state government is from GST,” he said.
Kerala Finance Minister KN Balagopal has also raised similar concerns, who said the state will strongly oppose if any steps are taken to bring petrol and diesel under the GST regime.
According to him, if petrol and diesel are brought under the purview of GST, the state will suffer a loss of Rs 8,000 crore annually.
BJP-ruled Karnataka has also decided to oppose the proposal as its average monthly revenue is expected to come down to Rs 600 crore from the current Rs 1,500 crore on the GST switch.
What do experts say
Some experts are of the view that under the current COVID situation, bringing petro products under GST will be a very tough call for both the Center and the states “as both will stand to lose”.
Rajat Bose, partner, Shardul Amarchand Mangaldas & Co, told news agency ANI, “Bringing petrol and diesel under the purview of GST will help the industry as it will reduce costs. Right now the consumer value added tax (VAT) and the burden of both have to be taken care of. Excise duty but once it is brought under GST, the prices will come down.
He said, “It is a difficult task for the council as many states may not agree to the proposal as it is a major source of revenue for the states. If it is brought under the ambit of GST, they should share it with the Centre. Gotta do it.” .
Anil Gupta, managing director of Okaya Power Group, also told ANI that the GST on electric vehicles is 5 per cent, but for items such as batteries, electronics charges, it is 18 per cent.
“It would be great if the GST Council can reform this inverted duty structure. We welcome whatever decisions are forthcoming in favor of the entire electric vehicle industry,” Gupta said.
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