GST Council rejects demands to bring petrol, diesel under GST

Finance Minister Nirmala Sitharaman Friday made it clear that petroleum products such as petrol and diesel will not be brought under the GST anytime soon writes ETV Bharat's Krishnanand Tripathi

New Delhi: Sitharaman, who heads the all-powerful GST Council comprising both the Centre and States, made it clear that the issue of bringing petrol and diesel under the GST was included in the agenda of the meeting due to Kerala High Court order, which had suggested that the issue be placed before the apex decision making body.

“This item came on the agenda purely because of the Kerala High Court order. So on the order of, on the direction of the Court, the matter was included in the agenda,” Sitharaman told reporters in Lucknow after the meeting.

The inclusion of the issue of bringing petroleum products such as petrol and diesel under the GST had led to intense speculation that the Centre and States might agree to bring them under the GST to reduce their prices, which are at a record high.

However, Sitharaman made it clear that the majority of the members in the GST Council were against the inclusion of petrol and diesel under the GST.

“Members said that they don't want it (petroleum products) to be included in the GST. Several members spoke against it openly,” she said.

Sitharaman said the Council’s decision would be reported to Kerala High Court, which directed the government to place the matter before the GST Council.

“We shall go back to the court and report that the matter was brought before the Council and the GST Council felt that it wasn't the right time to bring them (petroleum products) in the GST,” said the finance minister as she explained the reason for inclusion of the issue in the agenda of the 45th meeting of the Council.

The GST Council’s decision comes at a time when Prime Minister Narendra Modi’s government is facing strong criticism from opposition parties and also on social media for refusing to reduce the excise duty on petrol and diesel.

Several economists, including the Reserve Bank, have expressed concerns that high incidence of central and state taxes on petroleum products was feeding into inflation but not only the Centre but States also have so far refused to reduce their taxes except in some isolated cases such as Tamil Nadu that cut down the VAT on petrol by Rs 3 a litre last month.

Finance Minister Nirmala Sitharaman has often defended the high incidence of excise duty on petrol and diesel saying that any reduction in the duty would also affect the revenues of States as more than 40% of it is transferred to them under the finance commission formula.

Several economists suggested inclusion of petrol and diesel under the GST to cut down their prices as the highest slab under the GST is 28% as against the tax incidence of 50% in the retail price of diesel in Delhi and more than 55% in case of retail price of petrol.

According to the information given on Indian Oil’s website, the retail price of petrol in Delhi was Rs 101.19 per litre on Thursday (September 16) and the price of diesel was Rs 88.62 per litre.

According to the price buildup shared by the company, the base price of petrol was Rs 40.97 per litre and it was given to dealers at Rs 41.27 litre.

The retail price included an excise duty of Rs 41.27 litre, collected by the Centre and VAT of Rs 12.96 collected by Delhi government among other things.

Similarly, in case of diesel, Indian Oil’s base price was Rs 40.78 per litre and it was given to dealers at Rs 41.10 per litre.

The Centre collects Rs 32.90 as excise duty on diesel while Delhi government collects Rs 23.35 as VAT, among other things, taking the retail price of diesel to Rs 88.62 per litre in Delhi.

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