New Delhi: Petrol and diesel prices could be cut by half if the commodities are brought under the ambit of the Goods and Services Act (GST).
Union finance minister Arun Jaitley and petroleum minister Dharmendra Pradhan have asked for petroleum products to be included in the GST regime but states had so far opposed the move for fear of losing the tax revenue.
Petroleum products could be cheaper by 22 percent to 50 percent depending on the GST slab they are assigned to. The GST has five slabs - 0, 5, 12, 18 and 22 percent.
In Mumbai, petrol now sells for Rs 79.48. If it is brought under the 12 percent slab of the GST, the price will come down to Rs 38. Customers will have to pay only Rs 40.05 at 18 percent rate and Rs 43.44 at 22 percent rate.
Even if the 28 percent slab is chosen, petrol could be sold at Rs 50.91, including luxury cess of 22 percent.
Diesel sells for Rs 62.37 in Mumbai. The fuel could be sold at Rs 36.65 at 12 percent GST rate, Rs 38.61 at 18 percent, Rs 41.88 at 28 percent and Rs 49.98 at the top 28 percent slab and 22 percent cess.
Petroleum products were kept out of the purview of GST on the insistence of the states. While the central government imposes 23 percent excise tax on these products, states impose 15 to 34 percent tax. The value-added tax varies from state to state.
While the VAT is 27 percent in Delhi, Maharashtra imposes 47 percent. In Kerala, the tax rate is 31.8 percent for petrol and 24.5 for diesel.
Neither the central government nor the states can decide to include petroleum products in the GST regime. Only the GST Council can do so, under the GST Act.
All the states have agreed to cap the VAT on natural gas at 5 percent for the sake of industries that rely on natural gas. Industries can claim input tax credits on the raw materials they use.
This could be a model on the way to implement unified tax system on all petroleum products.