This article is from Oct 07, 2021

How to reduce petrol, diesel price without bringing it under GST?

People are struggling with the rise in the price of petrol and diesel every day. It is known that the petrol that is sold for more than 100 rupees includes Rs.33 central government tax and Rs.22 state government tax. The price of fuel in India is high because of the tax by the central and state governments.

Politicians and a few of the people keep commenting that the petrol and diesel price would be reduced if it is brought under GST to eliminate state and central taxes.

It was debated when the DMK ruling Tamil Nadu government opposed the plan of bringing petrol and diesel under GST recently in the 45th GST council. Along with Tamil Nadu, BJP ruling Karnataka government too opposed the plan.

The Finance Minister Palanivel Thyagarajan, “When BJP started ruling, the tax for petrol was Rs.10 and that of diesel was Rs.5, which has now increased to Rs.32 and Rs.31 respectively. The central government has not split the cess to the state government. The central government is not looking to bring petrol and diesel under GST. 20% of overall income for the central government comes from petrol and diesel taxes. Tamil Nadu government is ready to bring petrol and diesel under GST if the central government’s cess is eliminated”, said.

How much is cess?

The central government charges Rs.32.90 per litre petrol as excise duty/cess. This includes the basic excise duty of Rs.1.40, Road and infra cess Rs.18, Agriculture and infra cess Rs.2.50 and Special additional excise duty Rs.11.

No matter if the price of crude oil gets increased or reduced, the tax fixed by the central government on petrol and diesel remains the same. The cess levied on petrol and diesel by the central government should be spent on what it is planned for. Hence cess share will not be provided to the state governments. The price of petrol and diesel still increases after cess because of the state government’s VAT.

Products that come under GST will have a maximum of 28% as central and state governments’ tax and hence people prefer to bring it under GST.

But the Finance Minister Palanivel Thyagarajan commented that the state government will be convinced to bring petrol and diesel under GST if the central government’s cess is eliminated. This is because in 2017 in the 19th GST Council, 28% GST plus cess is fixed for cigarettes.

The excise duty/cess collected for petrol and diesel in the BJP regime is 14.4 lakh crores. And this gets increased every year. Hence the central government will not bring it under GST. Both the governments depend majorly on petrol and diesel tax.

If the central government come forward to reduce cess from the central government’s tax of Rs.32.90, there are chances for the reduction of petrol and diesel price. But no one raises a voice against reducing cess. Similarly, other state governments should reduce the state tax like how the TN government reduces it by Rs.3. When both the taxes are reduced, then the price of petrol and diesel would be reduced in turn.

Link : 

Excise duty, cess collected from petrol, diesel used for infrastructure development: Govt

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