Government Ready To Bring Diesel & Petrol Under GST Regime, Says India's Petroleum And Natural Gas Minister

The central government is ready to bring petrol and diesel under the GST regime, India¡¯s Petroleum and Natural Gas Minister Hardeep Singh Puri has said.

However, he pointed out that it is unlikely that the states will agree to such a move.

"For bringing the petrol and diesel under the GST, the States have to agree. If the States make the move, we are ready. We have been ready all along. That¡¯s my understanding. It is another issue how to implement it. That question should be addressed to the finance minister," Mr. Puri told reporters yesterday, as per PTI.

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¡°It is not difficult to understand, they (States) get revenue out of this. One who is getting revenue, why would he leave it? Liquor and energy are two things that generate revenue. It is only the Central government which is worried about inflation and other things,¡± he added.

Any Respite From Soaring Fuel Prices?

When asked if the people can expect some respite in terms of fuel prices, Minister Puri said India has seen one of the lowest increases in these prices in the past year.

¡°I am surprised by your question. In lighter vein, people are asking me when the prices will rise again. In North America, the fuel prices went up by 43% in one year but in India it went up by only 2%¡±

¡°If there is a bright spot anywhere in the world, it¡¯s India. It¡¯s not me saying it, it is Morgan Stanley. It¡¯s the managing director of IMF saying this,¡± Mr. Puri said.

¡°During Covid in March 2020, the price of an oil barrel had come down to $19. 56 which is now $96. I don¡¯t answer hypothetical questions but the efforts of the Central government will be that prices remain stable,¡± he said.

Also Read: Train Ticket Cancellation To Attract GST

"Difficult To Say About Future"

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The Minister also stated that India has been able to protect itself from rising fuel prices by taking a number of steps, including the Center lowering excise duty.

¡°There are some countries in our neighbourhood which have fuel shortages, and prices are exorbitant. But we did not have (fuel) shortages even in the remote areas of the country. It has been a very strong navigation at the level of the Centre and the states. What will happen in future it is difficult to say.¡±

Industry Experts Expect Fuel Prices To Fall

While India¡¯s Petroleum and Natural Gas Minister Hardeep Singh Puri may not have indicated any fall in fuel prices and emphasized on government¡¯s efforts to keep the prices stable, various industry experts have been of the view that bringing petrol and diesel under GST regime could lower the fuel prices. Whether fuel will be brought under GST or not has been a topic of discussion since last year.

The 45th meeting of the GST Council, chaired by Finance Minister Nirmala Sitharaman, in September last year, had discussed the issue of bringing petroleum products under the GST. However, the Council had decided to continue keeping the petroleum products out of the GST purview.

Bringing petrol and diesel under GST would definitely be preferred to ensure lower price burden for the consumers and greater functional ease across states in the long run, likely extending benefits both on growth and inflation fronts at the macro level, as per ET report.

¡°Bringing petroleum products under GST will help a lot. It is good for everyone. It is good for the economy,¡± Pradeep Multani, President, PHD Chamber of Commerce and Industry, had told ANI in March 2022, adding that the hike in the prices of petroleum products like petrol and diesel have had a huge cascading effect on a number of sectors, ultimately impacting the common people, especially the poor, the most. So, bringing petroleum products in GST will minimise the cascading effect. Companies can avail of the input tax credit. Ultimately the prices will come down.¡±

Estimated Drop In Fuel Rates

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To understand the expected change in fuel rates, let us assume the GST rate that may be levied on Diesel and Petrol turns out to be the highest slab's rate of 28%.

As per current prices, and the various taxes and other components that get added to the base price of diesel and fuel, Here's what the estimated prices may look like after GST gets levied:

(As per current data on Hindustan Petroleum's website for petrol and diesel's breakup of base rate, excise duty, average dealer commission and VAT). For post GST estimation, we have assumed that the GST will replace the various duties and taxes levied and the assumed 28% GST gets levied on base fuel price + average dealer commission.

(For Delhi , rate taken from here.)

Petrol

Current price: Rs 96.76

Estimated price after GST : Rs 74.49

Diesel

Current price: Rs 89.66

Estimated price after GST: Rs 77.76

However, these are estimations based on assumptions and the current fuel prices and the breakup of various taxes and commissions that make up the fuel selling price.

Now it remains to be seen whether, firstly, central government is able to implement GST on petrol and diesel prices, and secondly, what impact (if any) this move turns out to have on consumers.

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