Will prices of petrol and diesel come down if they are included in GST regime?

Hyderabad: Will inclusion of petrol and diesel in the GST regime bring down fuel prices? Industry experts say that the fuel prices would come down if petrol and diesel were included in the GST regime, benefitting the customers. But such a move is fraught with the danger of leading to a severe shortfall in the […]

Hyderabad: Will inclusion of petrol and diesel in the GST regime bring down fuel prices? Industry experts say that the fuel prices would come down if petrol and diesel were included in the GST regime, benefitting the customers.

But such a move is fraught with the danger of leading to a severe shortfall in the revenues accrued to both State and Central Governments. If indeed petrol and diesel are included in the GST structure, the Centre should be ready to compensate the losses state governments would accrue.

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The GST council which met in Delhi on Friday, has not however, taken a call on bringing the petroleum products in the ambit of uniform indirect tax regime. The Council felt it was not time to bring petrol and diesel under GST.

Dean of Rajiv Gandhi Institute of Petroleum Technology (RGIPT) Sanjay Kumar Kar told Telangana Today, “Centre should evaluate what tax bracket they would like to put fuel to protect the interests of States. Revenues from the government kitty will obviously go down if petrol and diesel are brought under GST as a lot of tax components are put on fuel. It is a call that States keep on opposing but the Central government if it wants to introduce ‘one nation-one tax’, has to seriously think upon it.”

Kar added, “At this point of time, only the petroleum department can contribute significantly to the revenues of the government. If the fuel is included under the GST, the prices will go down. The tax component is beyond 50 per cent now. But looking at the economy and tax collections, it may not be possible to take the plunge on tax collections, as the government has to take care of social development.”

Institute for Advanced Studies in Complex Choices (IASCC) co-founder Anil K Sood noted that the inclusion of fuel under GST can be considered by the Central government provided the input tax credit is available for oil buyers (such as transportation companies) and the aggregate fuel rate gets reduced for customers. States should also get a fair deal.

Vikas Singh, president, Crux Management Services, said, “GST was implemented with the idea of including all the products in its ambit. By including fuel under GST, the prices will go down. Inclusion will bring in transparency and reduce inflation. At the same time, the Central government should be able to compensate for the revenue losses of State governments. If they are not compensated, the delivery mechanism of the States will fail.”

By including fuel under GST, equity will be brought. Fuel currently accounts for 7-8 per cent of inflation. And 10 per cent increase in fuel costs will increase the inflation by three per cent, Singh observed.

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