Tuesday, 29 November 2022

Petrol and diesel may consider bringing into GST by GST Council

Petrol and diesel may consider bringing into GST by GST Council

GST Council on Friday might consider taxing diesel, petrol, and other products of petroleum under the single national GST taxes regime, a move that may require huge compromises by both state and central governments on revenues they collect from taxing the product.

In its meeting in Lucknow on Friday, the Council, which comprises state and central finance ministers, is also likely to consider expanding the time for duty relief on COVID-19 essentials work.

GST is being thought of as a solution for record-high diesel and petrol rates in-country, as it would end the issue effect of tax.

State VAT is imposing not just on the cost of production but also the excise duty charged by the Centre on such a show.

The Kerala High Court, based on a petition, asked the GST Council to bring diesel and petrol within GST.

Sources said bringing diesel and petrol within GST would be placed before the discussion of Council in light of the court asked the Council.

When a national GST subdivided central taxes such as state levies like VAT and excise duty on 1 July 2017, five petroleum goods like petrol, natural gas, crude oil, diesel, and ATF, were kept out of range for the time purpose.

Petrol and diesel may consider bringing into GST by GST Council 1pixabay image

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This is because both state and central government finances relied heavily on taxes on these products.

Good and Service Tax is a consumption-based tax; bringing petrol products under the rule would mean states where these products are selling get the revenue and not ones that currently derive the most benefit because they carry the production center.

With the vast population and high consumption, Uttar Pradesh and Bihar would get more revenue at the costs of states like Gujarat state.

With state VAT and central excise making up half of the retail selling price of diesel and petrol current situation,

Imposing GST on them would mean charging a peak rate of 28 percent plus a fixed surcharge going by to the principal of the new levy is equal to the old tax.

Tax experts said bringing petrol products under GST will be tough for both the states and Centre as both governments will lose revenue. The BJP-ruled state like Gujarat will fail even if a product like natural gas is brought under GST tax as it gets a lot of income from taxing the local production and import of the fuel (LNG).

The Centre will also lose most of the Rs 32.80 per liter excise duty on petrol and Rs 31.80 on diesel make up of cesses, which it does not share with the states. Under GST, all revenues will be splitting 50 between the states and the Centre.

The GST Council, chaired by Nirmala Sitharaman, Finance Minister, in a meeting on 17 September, could discuss the method of continuation of repayment cess beyond 2022 June.

It is the first time in 20 months that the GST Council will have a physical meet. The last such meeting was held on 18 June December 2019, before the COVID-19-induced lockdowns.

When the GST was introduced on 1 July 2017, it combined over a dozen state and central levies, five commodities, crude oil, aviation turbine fuel (ATF), petrol, diesel, and natural gas,

This meant that the central government imposed excise duty while state governments charged VAT. The taxes, with excise duty, in particular, have been raised regularly.

While the taxes have not gone down, a spike in global oil prices on-demand recovery has pushed diesel and petrol to an all-time high, leading to demand for them to come under the GST.

Including oil products in GST will help companies set off taxes on input and bring about equality and stability in taxation on fuel in the nation.

The Council held the 45th meeting on Friday and will considerably extend the duty relief available for COVID-19 necessity.

The previous Council meeting was held online via video conferencing on 12 June, during which tax rates on various COVID-19 essentials were reducing till 30 September.

Goods and services tax rates were slashing on COVID-19 drugs such as Remdesivir and Tocilizumab, medical oxygen and oxygen concentrators, and other COVID-19 essentials.

The Council is likely to discuss the continuing levy of cess on sin and demerit goods concerning compensation cess. The amount collect would be passing on to states for loss in revenue on account of GST.

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