GST Council may discuss bringing fuel under indirect taxes regime

by Business | 15-09-2021 | 337 views

Delhi: For the first time since the one tax for all India, GST, came into play in 2017, the supreme decision-making entity, GST Council, may consider a proposal to bring petrol and diesel under the GST regime.

The agenda for the GST Council scheduled to meet on September 17 in Lucknow includes considering taxing petrol, diesel and other petroleum products under the single national GST regime.This comes when fuel prices are at the highest levels and consumers are taking a hit. There has been a clamour to include fuels under the GST regime as that is expected to drastically bring down prices.

When a national GST subsumed central taxes such as excise duty and state levies like VAT on July 1, 2017, five petroleum goods - petrol, diesel, ATF, natural gas and crude oil - were kept out of its purview till the time states acquired a revenue-neutral situation (when GST revenue matches the revenue generated in pre-GST era).

Currently, the five fuels are subjected to central excise, cess and state Value Added Tax which brings in huge revenues for the Centre and the states.Several states have also been opposed to subsuming fuels in GST as it is a consumption-based tax and bringing petro products under the regime would mean states, where these products are sold, get the revenue and not ones that currently derive the most benefit out of them because they are the production centre.

Despite the clamour, states have been staunchly opposing the move, fearing huge revenue losses. That's why the GST Council has never taken up a proposal to subsume fuels in the GST regime.This time, the council didn't take up a proposal for consideration suo motu. Instead, it was forced to do so as in June, the Kerala High Court, based on a writ petition, asked the GST Council to take a decision on bringing petrol and diesel within the goods and services tax (GST) ambit.

However, sources confirmed that the proposal for bringing petrol and diesel within the GST would be placed before the Council for discussion in light of the court asking the Council to do so.

But in the Friday meeting, the move may not find support from states cutting across party lines. Even the Centre may not be too keen to back the proposal as the move may require huge compromises by the central and state governments on the revenues they collect by taxing these products.

The Council, which comprises central and state finance ministers, in its meeting scheduled in Lucknow on Friday, is also likely to consider extending the time for duty relief on COVID-19 essentials, according to sources in the know of the development. 

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