Petrol and diesel will not come under the purview of goods and services tax in the immediate future as neither the Central government nor any of the states is in favour on fears of heavy revenue loss, a top source said today.
When the one-nation-one-tax regime of GST was implemented in July last year, five petro-products — petrol, diesel, crude oil, natural gas, and aviation turbine fuel were kept out of its purview for the time being.
Though there have been talks in the industry and by some ministers, including by Oil Minister Dharmendra Pradhan and Road Transport Minister Nitin Gadkari, for the need to bring them under GST at the earliest to deal with volatility in prices, there is no immediate plans on the anvil to do so, the source, who wished not to be named, said.
The Union finance ministry, he said, has not mooted any proposal to bring petrol and diesel or even natural gas under GST but took up the issue at the last GST Council meeting on August 4 based on media reports.
“All states were opposed to the idea,” he said.
If the two fuels are put under GST, the Centre will have to let go 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. States, on the other hand, want to keep a revenue tool in their hand to meet any contingency like the floods in Kerala, he said.
The Centre currently levies a total of Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel. On top of this, states levy Value Added Tax (VAT) – the lowest being in Andaman and Nicobar Islands where a 6 per cent sales tax is charged on both the fuel.
Mumbai has the highest VAT of 39.12 per cent on petrol, while Telangana levies highest VAT of 26 per cent on diesel. Delhi charges a VAT of 27 per cent on petrol and 17.24 per cent on diesel.
The total tax incidence on petrol comes to 45-50 per cent and on diesel, it is 35-40 per cent.
Under GST, the total incidence of taxation on a particular good or a service has been kept at the same level as the sum total of central and state levies existing pre-July 1, 2017. This was done by fitting them into one of the four GST tax slabs of 5, 12, 18 and 28 per cent.
For petrol and diesel, the total incidence of present taxation is already beyond the peak rate and if the tax rate was to be kept at just 28 per cent it will result in a big loss of revenue to both centre and states.