The debate surrounding the inclusion of petrol and diesel under the Goods and Services Tax (GST) continues to grip the nation. As of now, these fuels remain outside the GST ambit, with different states applying varying rates of Value-Added Tax (VAT), central excise duty, and central sales tax.
The matter caught attention again during the current Lok Sabha session as Shyam Singh Yadav, MP sought clarity on the government’s stance. The Finance Minister, Shrimati Nirmala Sitharaman, responded, shedding light on constitutional provisions and potential implications.
The issue of bringing petrol and other fuels under GST has been a point of contention since the introduction of GST in India. The Finance Minister reiterated the constitutional aspects, pointing to Article 279A(5) of the Constitution, which mandates the GST Council to recommend the taxation date for specific goods, including petrol and diesel.
The Goods and Services Tax Council shall recommend the date on which the goods and services tax be levied on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel.
Additionally, Section 9 of the CGST Act stipulates that GST on crude petrol and diesel, natural gas, and ATF shall be applicable from a date decided by the government, pending agreement with the states.
The Finance Minister, Mrs Nirmala Sitharaman, in the post-Union Budget conference held on February 11, 2023, hinted at the possibility of bringing petrol, diesel, ATF, natural gas, and select petroleum products under the GST umbrella.
However, she emphasized that this move would only occur with the agreement of the states. Mrs Sitharaman clarified that the GST on petrol would be imposed only after states determine a tax rate for crude oil. The Minister highlighted that the GST council has provisions to include crude oil under the GST system, aiming for a uniform pricing structure across the country.
The prolonged discussions indicate the complexity of the decision. Several states are resistant to the idea, citing potential revenue losses. Even with the proposed maximum GST rate of 28%, states fear a financial setback, as petroleum product taxation constitutes a significant source of income. States like Kerala have expressed strong opposition, citing potential annual losses of INR 8,000 crores.
As India marked six years of GST implementation in 2023, the inclusion of petroleum fuels remains a debated issue. The Finance Minister’s hints suggest a potential move toward GST inclusion, yet challenges persist. Until an agreement with the states is reached, the imposition of GST on crude products remains in limbo. The impact on citizens, particularly vehicle owners, underscores the importance of decisions in this realm. The debate continues, with further discussions expected to clarify the state and center’s stance on this critical matter.
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