Petrol and diesel likely to be brought under GST, decision on Sept 17

The Council in its meeting scheduled in Lucknow on Friday, is also likely to consider extending the time for duty relief on COVID-19 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. The 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.

With central excise and state VAT making up for almost half of the retail selling price of petrol and diesel currently, levying GST on them would mean charging a peak rate of 28 per cent plus a fixed surcharge going by the principal of the new levy being equal to the old taxes. Tax experts said bringing petro products under GST will be a tough call for both the Centre and states as both will stand to lose. The BJP-ruled states like Gujarat will be a loser even if a product like natural gas is brought under GST as it gets a lot of revenue from taxing the local production and import of the fuel (LNG).

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.