Even though India continues to buy oil at discounted rates from Russia, despite western objections, petrol and diesel for Indians aren't getting any cheaper. Consumers have been waiting for a fuel price reduction since excise duty was cut on petrol and diesel last year. The government may finally fulfill the people's wish ahead of elections, since its ready to bring petrol and diesel under GST.
In an interaction with the PHD Chamber of Commerce and Industry, Finance Minister Nirmala Sitharaman said that petroleum and gas can come under the GST umbrella once states agree. Charging GST on fuel will mean that excise duty and other levies charged on petrol and diesel will go away. The ability to avail of input tax credit, will also allow retailers to lower fuel prices.
As of now, multiple levies account for 40 to 50 per cent of what we pay on petrol and diesel, but GST will help the seller do away with those. Under that system, only 28 per cent GST will have to be paid, which will clear the way for a significant price reduction. But some state governments are opposing this system, since a major chunk of their revenue comes from taxing petroleum products, and under GST they'll earn less.
The government has already lowered the GST on ethanol, which is mixed in petrol for lowering emissions, to 5 per cent from 18 per cent. The concentration of ethanol in the new blended fuel has also been increased to 20 per cent, which can make it more affordable.
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