Fuel Prices maybe halved under GST. Will Modi Government take the leap?

Fuel Prices maybe halved under GST. Will Modi Government take the leap?

Unlike all other consumer products, Petroleum isn't taxed under GST. The crude oil prices in India are still governed by VAT system. Petroleum Minist

Unlike all other consumer products, Petroleum isn’t taxed under GST. The crude oil prices in India are still governed by VAT system.

Petroleum Minister Dharmendra Pradhan has already pointed out the significant drop in the fuel prices, if governed by the GST. “The Petroleum products’ inclusion in GST only way for rational fuel prices,” The Petroleum Minister stated in a Tweet.

Just two days ago, petrol and diesel prices have risen to an all time-high in three years. In Mumbai, for example, the petrol price was the highest in the country – on Tuesday (12 September), it was around Rs 79.48 per litre.

The residents of Delhi are a shade luckier, for they have to fork out a little less for both petrol and diesel. Rs 70.38 per litre for petrol and Rs 58.72 per litre for diesel on 12 September. This difference is there because though the excise duty central government levies  is the same in case of both Maharashtra and Delhi. But the value added tax (VAT) charged by the Delhi government is comparatively less than that by the Maharashtra government.

We notice a difference in the pricing on a state-wise criteria. Meanwhile International crude oil prices have significantly gone down. Finance Minister Arun Jaitly, who heads the GST councils is now facing some serious questions. The daily rise in fuel price, a witty scheme by the Government may had covered things for a while. Even as the public anger is palpable on the social media and other forums, there is no indication from the government of its willingness to reduce these taxes. Some critics have criticized the Modi Government and termed the new reforms as a misguided taxation policy that has treated the oil sector as government’s cash cow.

Back in 2014 when Congress was in power petrol was taxed at 34% and diesel at 21.5% respectively. Narendra Modi addressed the issue and promised ‘ache din’ which seems far now as petrol is taxed at a whooping 59% and diesel has breached 50%.

Even in developed nations, petrol costs are very low as compared to India. For example is the US gasoline costs about 0.7 USD/litre. Which is around 45 INR to be exact. Even in China the cost of a litre petrol is a tad bellow 1 USD.

According to the information by the Indian Oil Corporation the petrol price build up is due to a simple reason. The fuel costs only Rs 26.65 at the refineries. Dealers get a litre of petrol at Rs 30.70. But, petrol sells at Rs 70.39 a litre in Delhi. This means Rs 39.41 is charged as tax component and dealer’s commission on every litre of petrol sold in the national capital.

As per the PPAC data, excise duty on petrol has increased by 54 per cent since November 2014. VAT on petrol had an average increase of 46% .  Meanwhile dealer’s commission has increased by astonishing 73 %. Similarly for diesel, the center has incremented the excise duty by 154%. Even VAT and dealer’s commission have witnessed 48% and 73% increase respectively.

On 14 number of occasions, the excise duty has increased since 2014.

We dearly hope that crude oil comes under GST. At least the commoners will have some respite. If the miracle happens then, the prices will fall substantially.

At 12 per cent GST, the petrol will sell at Rs 38.1 in Delhi – almost Rs 32 cheaper than the current rate for one litre of the fuel. At 18 per cent, petrol will be 40.05 a litre in Delhi while at 28 per cent, it will cost Rs 43.44 per litre.

If the SUV compensation cess comes into play above 28% mark. Petrol will sell at Rs 50.91 in Delhi – still about Rs 20 cheaper than the existing rate.

But passing the bill will not be easy as the GST council upholds the power to do so. The councilmen are from various states those reap benefits from this taxation. The liquid gold business is lucrative to both, the government as well as the dealers. Meanwhile the citizen have to pay the price for it.