Naveen Patnaik's MP Calls For Bringing Petro-Products Under GST

Biju Janata Dal MP Sasmit Patra has written to Union Finance Minister Nirmala Sitharaman, calling for the inclusion of Petrol and Diesel under the Goods and Services Tax framework. He urged that this be placed on the formal agenda in the forthcoming GST Council meeting, citing how high petrol and diesel prices affect the cost of food, transport, agricultural input and household expenditure.

Patra's suggestion comes amid a hike in petrol and diesel prices that has brought down a flood of criticism from the Opposition. The hike has come amid the escalating tension in the Middle-east and a massive 1,600-crore-a-day loss for the oil companies.

In his letter, Patra said the Article 279A(5) of the Constitution of India envisages the eventual inclusion of petroleum products within the GST framework and cited judicial and institutional precedents, including the 45th GST Council Meeting in September 2021, where the matter had come up for consideration.

The letter highlights Odisha, presenting a comparison between the current taxation structure and a possible GST-based framework. 

Odisha currently has nearly 28 per cent VAT (Value-Added Tax) on petrol and 24 per cent VAT on diesel, contributing significantly to current retail fuel prices. But under a 28 per cent GST framework, petrol prices could go down by nearly Rs 25 a litre; Diesel prices could reduce by around Rs 14 per litre.

GST on fuel can apply only on the recommendation of the GST council, comprising the Centre and the states - which may not be amenable to the idea in view of the possible revenue loss. 

Patra emphasized the need for a calibrated and revenue-protected transition mechanism. Odisha, he pointed out, earns nearly Rs 9,700 crore annually through VAT on petroleum products. 

The GST Council, he suggested, may examine a phased inclusion model for petrol and diesel under GST, a calibrated GST rate structure, transitional compensation support for states, a limited cess-based mechanism to safeguard fiscal stability during transition.