New Delhi, June 20 (Agencies): Petrol and diesel are likely to be taxed at the peak GST rate of 28 per cent, plus state sales tax, when the two auto fuels are brought under the goods & service tax regime, a top government official said.
”There is no pure GST on petrol and diesel anywhere in the world and so in India too it will have to be a combination of GST and VAT,” said the official, who is closely involved with the GST implementation.
The peak GST rate plus state sales tax will be equal to the present tax incidence, which is made up of central excise duty and state sales tax.
So retail prices will not change in a big way. Before the two fuels are put under GST, the Centre has to decide if it is willing to let go the Rs 20,000-crore input tax credit it currently pockets by keeping petrol, diesel, natural gas, jet fuel and crude oil out of the GST regime, which came into force from July 1, 2017, the official said.
For petrol and diesel, total taxes at present are already more than what it would be at the GST peak rate. But, if the fuels are taxed only at the GST peak rate, the Centre and states would lose revenues in a big way.
At present, taxes account for almost half the retail price of petrol. The Centre levies Rs 19.48 per litre as excise on petrol and Rs 15.33 per litre on diesel. On top of this, states levy sales tax at varying rates, the lowest being Andaman & Nicobar Islands where it is six per cent.
Mumbai has the highest sales tax of 39.12 per cent on petrol while Telangana levies the highest, of 26 per cent, on diesel. Delhi levies 27 per cent on petrol and 17.24 per cent on diesel.
GST has been spoken of as a cure for high fuel prices but the structure in the works would ensure that retail prices remain almost at the same levels unless the Centre and states decide to levy pure GST of 28 per cent and not add a state tax or a cess.
After petrol hit an all-time high of Rs 78.43 a litre and diesel Rs 69.31 on May 29, rates have fallen marginally as world oil prices softened and the rupee strengthened against the US dollar. Petrol cost Rs 76.27 a litre and diesel Rs 67.78, in Delhi on June 20.
Since GST is charged ad valorem or as a percentage of ex-factory price, retail prices would go up whenever refinery gate prices are increased. On the other hand, prices could also go down.
Union minister Arun Jaitley had in a blog post on Monday alluded to states earning more through their ad valorem tax when oil prices rise. The Central excise is a fixed levy and does not change with changes in prices.
”The States charge ad valorem taxes on oil. If oil prices go up, States earn more,” he had written.
Mahesh Jaisingh, Partner, Deloitte India, said the ideal way for inclusion of petroleum products would be to levy only GST at a designated rate and allow full input tax credit on it.
”However, this may look utopian at this stage and the Government may consider a hybrid structure to begin with wherein these products would attract GST as well as some of the existing state levies in a manner where the overall percentage of tax rates remains same but the industry gets the ability to claim input credit of GST,” he said.
GST subsumed more than a dozen central and state levies such as excise, service tax and VAT when it was implemented from July 1, 2017.
However, its implementation on five petroleum products — petrol, diesel, natural gas, crude oil and ATF — was deferred.
