The discussion around GST on petrol and diesel in India has been ongoing since the Goods and Services Tax (GST) was introduced. The inclusion of these fuels in the GST regime has been a significant point of contention among stakeholders. This article delves into the current status of GST on petrol and diesel, government strategies, GST rates, and provides a price comparison to understand its potential effects on consumers.

Status of GST on Petrol and Diesel

Since GST's implementation in July 2017, whether petrol and diesel should be included under it has remained contentious. Presently, these fuels are taxed via central excise duty and state VAT, leading to variations in prices across states and Union Territories.

During the 53rd GST Council meeting, Finance Minister Smt. Nirmala Sitharaman indicated the possibility of taxing petrol and diesel under GST, but emphasized state government consensus is crucial. The decision to tax these fuels under GST awaits state authority approval.

Understanding GST on Petrol

Currently, petrol is exempt from GST, affected by central excise and state VAT. The Central Excise Duty is charged on the base price, while state VAT covers the dealer's commission, causing a pricing disparity across states.

According to the Central Goods and Services Tax (CGST) Act's Section 9, and Article 279A of India's Constitution, the GST Council will set the date for GST on petrol. As of now, no official notification exists.

Current Tax Structure vs. Potential GST Impact

Currently, petrol pricing includes:

• Central Excise Duty on base price
• State VAT on dealer commissions

The GST Council considers capping GST at 28% for petrol, plus an additional cess, pending state government consensus.

Let's compare current pricing to a hypothetical GST-based model.

Current Pricing Structure:

• Fuel Cost (Including Freight): ₹57.35/litre
• Excise Duty: ₹19.90/litre
• Dealer's Commission: ₹3.87/litre

Total Cost Calculation:

• Total Base (Fuel Cost + Excise): ₹77.25
• Total with Dealer's Commission: ₹81.12
• VAT (Delhi @ 19.4%): ₹15.74
• Retail Price: ₹96.86/litre

Potential GST Pricing:

• Fuel Cost (Including Freight): ₹57.35/litre
• Dealer's Commission: ₹3.87/litre
• Total Base (Fuel + Commission): ₹61.22
• Assumed GST (28%): ₹17.14
• Retail Price: ₹78.36/litre

Price Comparison and Consumer Benefits

The comparison suggests a lower retail price for petrol under GST. The existing tax model significantly inflates retail price due to combined taxes, i.e., ₹96.86/litre. Under GST, it may drop to ₹78.36/litre, showing potential savings.

This reduction arises from eliminating multiple tax cascades, offering a more transparent tax structure and possibly reducing consumer prices.

Government Plans for GST on Petrol

Calls to include petrol in GST are driven by the need to equalize prices nationwide, curbing state disparities. Although central excise duties were cut to stabilize costs, consensus among state governments remains crucial.

Once revenue implications are addressed and state finances safeguarded, the government might consider petrol under GST.

GST Rates on Other Petroleum Products

While petrol and diesel await GST, other petroleum products have specified rates:

• Aviation Turbine Fuel (ATF): 5% GST
• Petroleum Oils from Minerals: 18% GST
• Petroleum Gases: 18% for gaseous, 5% for liquefied, per HSN code

These rates showcase the varied GST impacts across petroleum products, highlighting differing industry segments.

Conclusion

The conversation surrounding GST's application to petrol and diesel remains pivotal in India's tax policies. Current pricing relies on central excise and state VAT, but transitioning to GST could offer standardized pricing, potentially lowering retail costs. This move awaits consensus from state governments, ensuring state revenue is unaffected.

As authorities deliberate, consumers and industry players await clarity on GST's structure and impact on fuels. Current knowledge on potential outcomes aids in prepping for potential shifts in India’s fuel taxation.

For further updates on GST impacts, stay informed with official announcements and seek advice from tax professionals for tailored guidance.