Discussion to bring petrol and diesel prices under GST is again on the peak. According to reports, trade association Associated Chambers of Commerce and Industry of India or ASSOCHAM has demanded to include petroleum products and stamp duty in GST. If the government considers the recommendation of ASSOCHAM and petroleum products are included in the GST, the price of petrol and diesel can witness a huge reduction.
According to Indian Oil Corporation Limited (IOCL), in Delhi, VAT and excise duty cost Rs 35.56 per litre. Apart from this, the average dealer commission costs Rs 3.57 per litre and the VAT on the dealer commission is around Rs 15.58 per litre. Also, Rs 0.31 is charged as freight charges on per litre petrol. If the government imposes GST by directly removing all these taxes, then the petrol price can get cheaper by up to Rs 25.
Centre and states tax on Fuel
Experts believe that if you pay Rs 72 for a litre of petrol half the amount goes as taxes. Each state has its own excise tax on petrol and then VAT comes into petrol. So if the actual cost of petrol for supplier Is Rs 36 per litre then it these taxes make it Rs 72 per litre by the time it reaches petrol pumps.
More Tax on fuel = more income for states
The petrol pump dealers also add their commission in the petrol and diesel, Asif Iqbal, Escort Security head, told Zee Business. If you add the centre and state tax, then it is almost equal to the actual price of petrol or diesel. Apart from excise duty, Value-added tax or VAT (additional tax), in which, when the prices of petrol and diesel are increased, the earnings of states also get a hike.
How cheap would be the petrol price
If petrol-diesel is brought under the purview of GST, then the central and the state government have to bear a huge loss. If you see the current fuel price then it is clear that if taxes are not applicable to it, then the petrol price can get cheap. With depreciation of excise duty and VAT of Rs 73.27 per litre will bring down petrol to Rs 37.70 per litre. If 28% of GST is imposed on petrol, then it will cost Rs 48.25 per litre, as per to Escort Security head Asif.
However, bringing petroleum products to GST is not an easy task. Because economists believe that the state has not yet appeared in favour of bringing its share of earnings. In such a case, keeping states' revenue loss in mind, the central government can not take the decision alone as the state a major part of the GST Council meeting.