Nirmala Sitharaman, Union Finance Minister, recently clarified that petrol and diesel will continue to be excluded from the Goods and Services Tax (GST). This is in response to a discussion about bringing petrol and diesel under the GST. A price reduction would have been possible, but motorists will still pay wallet-busting prices as a result.
In an interview, the finance minister said that the GST Council didn’t think it was time to bring petroleum products under the GST regime. The GST Council debated this issue on Friday due to the High Court’s order directing that petrol and diesel fuels be included in the GST as the result of a PIL.
Since both the central and state governments generate enormous revenue in the form of taxes from fuel sales, the question of including the fuels under GST remains a contentious one.
Petrol in Delhi cost Rs 101.19 per litre as of September 18, 2021. Of that, Rs 32.90 represents excise duty and Rs 23.35 represents sales tax (Value Added Tax). As a result of both taxes, motorists pay Rs 56.25 as a tax per litre of petrol.
As for diesel, the excise duty component is Rs 31.80 and the VAT is Rs 12.96 of the retail price. Each of these taxes accounts for 44.76 rupees or exactly 50 percent of the retail price.
Petrol and diesel excise duties generated Rs 3,34,894 crores for the Centre during FY2021. According to a reporter in his recent fuel pricing analysis, from the Centre’s perspective, it is only too obvious that gasoline and diesel account for the bulk of its revenue streams, especially in an era when GST collections are nothing to write home about.
As a result, states are also financially fragile, which undermines the argument for levying value-added taxes on auto fuels. In spite of everyone’s intent on maximizing sales during a difficult period of Covid-19, the customer is suffering in silence.
Additionally, both the federal government and the state governments have aggressively promoted the use of electric vehicles and electric mobility. Many states have brought in incentive-laden policies in support of electric vehicles, but the government’s PLI Scheme for India Auto with an outlay of Rs 26,058 crore is the biggest boost to EV adoption.