GST on Petrol & Diesel : A future with cheaper fuel bills a possibility?
In the wake of rising volatility on international oil prices and India’s exposure considering the fact that India meets its demands by importing more than 80% from abroad, there might be a possibility of the Government bringing Petrol & Diesel Products under GST.
For 2017–18, oil imports are pegged at 220 MT amounting to $88 billion while Domestic crude production would be between 32–36 MT, according to PPAC
Current breakdown of Petrol/Diesel prices
Here’s a breakdown of current Petrol & Diesel prices that include Central Excise & State VAT
Projected breakdown of Petrol/Diesel prices under GST
Assuming the current peak rate of GST at 28% + State VAT at average 26%
There could be more costs involved here, but assuming those won’t drive up the prices substantially, this is a good ballpark figure to take into consideration. Also as seen here if both Petrol & Diesel are taxed equally under GST, Diesel would cost more than Petrol. From the projections it seems that GST would bring significant reduction in Petrol & Diesel prices at current rates.
If recent reports are to be believed both the Center and State Governments aren’t willing to make this move. The Center has to let go of Rs. 20,000 Crores in input tax credit it receives if it were to add petroleum products under GST. So clearly, it makes for a sizable part of the Government’s revenues and letting go of the same is not something that’s planned for now.
In future, there might be hope for petroleum products to be added under GST regime, but the likelihood of consumers benefiting from the same is really low unless the oil prices stabilize.
