Giving hints of the likely tax structure when petrol and diesel are covered under the GST regime, a top government official told new agency PTI that it could be a combination of both GST (With a peak tax rate of 28 per cent) as well as local sales tax or VAT (to be applied by the states).
According to the PTI report, the peak GST rate plus VAT will be equal to the present tax incidence, which is made up of excise duty, levied by the central government, and VAT charged by the states.
However, bringing petrol and diesel under GST will not be an easy call for the central government as it will have to let go of about Rs 20,000 crore of input tax credit that it currently collects by keeping petrol, diesel, natural gas, jet fuel and crude oil out of the GST regime.
The official pointed out that there is no pure GST on petrol and diesel anywhere in the world, adding it has to be a combination of GST and VAT in India as well.
He also pointed out that the timing of including petro products in GST will be a political call which Centre and states have to take collectively.
As on today, the central government levies a total of Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel. The state governments, on the other hand, levy Value Added Tax (VAT) on these fuels.
Andaman and Nicobar Islands levies the lowest VAT of 6 per cent on both the fuel. Mumbai has the highest VAT of 39.12 per cent on petrol while Telangana levies highest VAT of 26 per cent on diesel. Delhi charges a VAT of 27 per cent on petrol and 17.24 per cent on diesel.
The total tax incidence on petrol comes to 45-50 per cent and on diesel, it is 35-40 per cent.