Fuel Price in India

Will fuel prices dip under GST Regime

It is difficult to bring Petroleum Products under the ambit of Goods & Service Tax as it would cause an annual revenue loss of around Rs 4 Lakh Crore* to both Centre & States. Tax on Petrol in India contributes a significant amount of revenue to both the Governments. In this article, we will discuss why petrol is not under GST.

Fuel Prices in India

Tax on petrol

Currently, in Delhi the cost of Petrol is Rs. 101.90 per liter, Out of which Rs. 33.02 is Excise duty & Rs. 23.44 is Value Added Tax (VAT). Tax on Petrol in Delhi together is as high as Rs 56.44 per liter (33.02 Excise Duty & Rs. 23.44 VAT) i.e. cost of petrol per liter without taxes is Rs 45.46 (Rs 101.90 minus Rs 56.44) in Delhi. So total taxes levied on petrol are around 125%* of the total cost.

Tax on Diesel

Also, the cost of Diesel in Delhi is Rs. 89.87. Out of which Rs. 31.80 is Excise duty & Rs. 13.14 is Value Added Tax (VAT). Both the taxes on Diesel together are as high as Rs. 44.94 (Rs. 31.80 Excise Duty & Rs. 13.14 VAT) i.e. cost of Diesel per liter without taxes is Rs 44.93 (Rs 89.87 minus Rs 44.94) in Delhi. So total taxes levied on Diesel are around 100%* of the total cost.

Excise Duty on Petrol & Diesel

Excise Duty on Petrol has approximately doubled during last 6 years & has risen by 88%. As on 16st August 2021, the Excise duty on Petrol is around Rs. 32.02 per litre whereas on 16th August 2015, the excise duty was around Rs. 17.04 per litre. Same in case of Diesel, Excise duty has risen by 209%. As on 16st August 2021, the Excise duty on Diesel is around Rs. 31.80 per litre whereas on 16th August 2015, the excise duty was around Rs. 10.26 per litre.

Fuel prices in India are out of the ambit of GST to prevent losses to the government. While the maximum tax that can be imposed on petrol and diesel under GST is 28% and currently the tax on petrol and diesel in India goes up to 125% & 100% respectively (Central & State Government together), differentiating in every state, if the government charges GST, then it may suffer loss in revenue of Rs 4 Lakh Crore*


Computation of Revenue Loss if Petrol & Diesel comes under the ambit of GST

Total revenue generated from taxes on Petrol & Diesel (Excise duty & VAT) = 5,74,663 Crore (3,71,726+2,02,937)

Average total taxes levied on Petrol & Diesel = 112.5% (125%+100%) As calculated above

Maximum tax that can be imposed through GST will be 28%, so total revenue generated from GST will be = 5,74,663 / 112.5 * 28 = 1,43,027 Crore.

Loss of revenue = 5,74,663 – 1,43,027 i.e. equals to 4,31,636 Crore

Which is equal to around 4 Lakh Crore.

Reference from the data mentioned below

Why do petrol and diesel prices not fall under GST

**This data is extracted from the Petroleum Planning & Analysis Cell (PPAC)

For this reasons we believe that Government will not move petrol & diesel under GST even in the near future. In Case of any Query related to Goods & Services Tax, Contact your Trustworthy Advisor ‘Manthan Experts’ at +91 9643 969 969

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Knowledge Source:

Outcomes of 43rd GST Council Meeting

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