GST Council may consider bringing fuel under indirect tax regime: Report

The Goods and Services Tax (GST) Council is likely to discuss the possibility of bringing petroleum products like petrol, diesel, natural gas, and aviation turbine fuel under GST, during its scheduled meeting on September 17. The other key issues that will be discussed in the meeting include tax concessions on Covid-treatment medicines, and a framework for mandatory Aadhaar authentication for existing 8 million registered firms gradually, according to a report in Hindustan Times.

The report has quoted anonymous sources saying that the fuel tax matter will be discussed on September 17, in line with the Kerala high court’s direction in June, to decide on including petrol and diesel under the ambit of GST. The petroleum products although fall under the GST regime as per the constitution, however, GST Council has not taken a call on when it will be levied. Due to revenue-related challenges, there is disparity among the Council members on if a uniform GST rate should be there on petroleum products.

In 2019-20, the taxes on petroleum products both at the Centre and state level were over Rs 5.55 lakh. Both petrol and diesel generate huge revenues. However, if GST is implemented on fuel, it will reduce the tax levies and also its retail prices. In Delhi, a litre of petrol is retailed at Rs 101.19 and diesel at Rs 88.62. The central excise is over 32% of petrol’s price, and value-added tax or VAT by states is 23.07%. In case of diesel, central excise is over 35% while state taxes are more than 14%.

The government increased the excise duty on fuel in 2020 to raise its revenue as the global crude prices declined. With pandemic effects and states’ economies being heavily disrupted, the state government also increased the tax levied on the fuel products. The petroleum sector is observed to have been contributed Rs 3,71,726 crore central excise revenue in 2020-21, and Rs 2,02,937 crore state levies or value-added tax (VAT).