GST Panel May Consider Bringing Petrol, Diesel Under GST Ambit: Report

Press Trust of India

14 Sep 2021, 06:31 PM IST

Nirmala Sitharaman led panel may consider bringing fuel products under GST regime

The Goods and Services Tax (GST) Council might on September 17, consider taxing petrol, diesel and other petroleum products under the single national GST regime.

The Council, which comprises central and state finance ministers, in its meeting scheduled in Lucknow on Friday, is also likely to consider extending the time for duty relief on Coronavirus essentials, according to sources in the know of the development.

GST is being thought to be a solution for the problem of near-record high petrol and diesel rates in the country, as it would end the cascading effect of tax on tax (state VAT being levied not just on the cost of production but also on the excise duty charged by the Centre on such output).

In June, the Kerala High Court, based on a writ petition, had asked the GST Council to decide on bringing petrol and diesel within the goods and services tax (GST) ambit.

Sources said bringing petrol and diesel within GST would be placed before the Council for discussion in the light of the court asking the Council to do so.

When a national GST subsumed central taxes such as excise duty and state levies like VAT on July 1, 2017, five petroleum goods – petrol, diesel, aviation turbine fuel (ATF), natural gas and crude oil – were kept out of its purview for the time being.

This is because both central and state government finances relied heavily on taxes on these products.
Since GST is a consumption-based tax, bringing petro products under the regime would have mean states where these products are sold get the revenue and not ones that currently derive the most benefit out of them because of they being the production centre.

The GST Council, chaired by Finance Minister Nirmala Sitharaman, in its September 17 meeting could also discuss the modalities of continuation of compensation cess beyond June 2022.

This is the first time in 20 months that the GST Council will have a physical meeting. The last such meeting was on December 18, 2019, before the pandemic-induced lockdowns.