PHDCCI urges Centre to bring petroleum products under GST

Industry chamber PHD Chamber of Commerce and Industry (PHDCCI) has urged the government to bring petroleum products in the ambit of goods and services tax (GST) soon, as high inflation in the fuel products is not only stoking overall prices but also increasing the cost of raw materials for manufactured items.

WPI in double digit growth

The cascading effect of high inflation in the fuel products has stoked overall inflation and increased the cost of raw materials for manufactured products. The Wholesale Price Index (WPI)-based inflation has been in a double-digit growth trajectory for the past three months, due to high prices of fuel. It has posed a serious challenge for businesses as it impacts the cost of production and reduced price-cost margin of the producers.

Increased demand

India’s fuel demand picked up in July as easing of pandemic-related restrictions accelerated economic activity, helping petrol consumption reach pre-Covid levels.

Petrol and diesel prices have shot to their highest prices this month. The retail price of auto fuel is nearly doubled due to heavy taxes. Both central and state taxes make up for 55% of the retail price of petrol and 50 per cent of diesel rates.

High taxes

While the central government levies a fixed excise duty of Rs 32.90 a litre on petrol and Rs 31.80 a litre on diesel, states charge an ad valorem rate of VAT that essentially results in per litre tax going up when prices rise, and falling when rates come down.

The revision cycle in fuel prices resumed soon after results for the state elections were declared in May. Since May 4, petrol price has been hiked over 40 times while diesel rates have gone up over 37 times and have been reduced on one occasion.