Will petrol and diesel come under the ambit of GST, the government gave this important information in Parliament

Minister of State for Finance Pankaj Choudhary in a written reply to a question in Rajya Sabha said that the purpose of levying excise duty on petroleum products is to mobilize resources. These resources are spent on infrastructure and other development related works.

Some reports have been given to the government to include petrol and diesel in GST.

The Goods and Services Tax (GST) Council has not recommended bringing petroleum products under the revised taxation regime. However, some reports have been given to the government to include petrol and diesel in GST. This information was given to the Parliament on Tuesday. Minister of State for Finance Pankaj Choudhary in a written reply to a question in Rajya Sabha said that the purpose of levying excise duty on petroleum products is to mobilize resources. These resources are spent on infrastructure and other development related works.

The minister said the changes in duty rates are made keeping in mind the international product prices, exchange rate, tax structure, inflation and the current financial situation. He said that the GST Council has not recommended bringing petroleum products under the revised taxation regime. However, some reports have been given to the government to include petrol and diesel in GST.

The minister said, some suggestions have been received to bring petrol and diesel under GST (Goods and Services Tax). Article 279A (5) of the Constitution states that the Goods and Services Tax Council shall recommend a date on which crude oil, high speed diesel, motor spirit (commonly known as petrol), natural gas and GST will be levied on Aviation Turbine Fuel (ATF).

GST Council did not recommend

Referring to the CGST Act, the minister said inclusion of these products in GST would require the recommendation of the GST Council. Choudhary further said, so far the GST Council, in which states are also represented, has not made any recommendation to include these items under GST.

He said that the government keeps a close watch on the factors affecting the international oil prices and intervenes by adjusting the excise duty rates on these products as and when required.

The government has reduced the central excise duty (including cess) on petrol by Rs 5 per liter and on diesel by Rs 10 per liter with effect from November 4, 2021, to give relief to consumers.

Will the government suffer due to the introduction of petrol and diesel in GST?

With the coming of petrol and diesel under the purview of GST, the state government as well as the central government will suffer. If oil comes under GST, then first of all the states will have to bear the huge loss. So far, diesel-petrol has not come under the purview of GST because of this reason, because no state wants to make its loss.

Most of the income of the states comes from the tax levied on diesel-petrol, so the states are opposing to bring petrol-diesel under the purview of GST. Due to this, the central government will also suffer a loss of about Rs 1 lakh crore, which is equal to 0.4 percent of the GDP.

In 2019, the total excise duty on petrol was Rs 19.98 per liter and that on diesel was Rs 15.83 per liter. The government increased the excise duty twice last year, due to which it increased to Rs 32.98 per liter on petrol and Rs 31.83 per liter on diesel.

In this year’s budget, the duty on petrol was reduced to Rs 32.90 per liter and that on diesel to Rs 31.80 per liter. Petrol and diesel prices hit a record high last month, leading to a cut of Rs 5 per liter on petrol and Rs 10 per liter on diesel.

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