Petrol under GST: Council unlikely to bite the bullet

New Delhi: A proposal to bring petrol and diesel under the GST regime would be placed before the GST Council for discussion on Friday in the light of the Kerala High Court asking the council to do the needful, but a decision in this regard seems highly unlikely, a source privy to development told FC.

The council, which is meeting in Lucknow on September 17, will be debating the most sought-after proposal at a time when fuel prices are at their highest levels, burning a hole the pandemic-hit consumers' pockets. But in Friday's meeting, the move may not find any support from states cutting across party lines. There has been a clamour from economist as well as political bosses to bring essential fuels under the GST regime to drastically bring down their prices.

It is learnt that several states have been opposing the move on fear of losing a chunk of this consumption-based tax. Even the Centre may not be too keen to back the proposal, as this may require huge compromises by the central and state governments on revenue.

Though removing tax inefficiencies could help consumers and businesses, it remains to be seen what kind of political consensus would be there in support for such a move, given the acute fund requirements of the central and state governments, said the source. "The key stakeholders, both Centre and states, are unlikely to support the inclusion at this juncture since Covid has impacted their revenue collections." the source added.

When the national GST subsumed central taxes such as excise duty and state levies like VAT on July 1, 2017, five petroleum goods—petrol, diesel, ATF, natural gas and crude oil—were kept out of its ambit till the time states acquired a revenue-neutral situation. Currently, the five fuels are subjected to central excise, cess and state VAT, which brings in huge revenues for the Centre and the states.

While some of the finished refinery products such as petrol, diesel and jet fuel are outside GST, other by-products like naphtha, light diesel oil, waxes and bitumen come under the GST regime. So, there is a high expectation that inclusion of all petroleum products within GST would simplify the tax structure and make the refinery products more tax-efficient.