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No proposal to bring fuels under GST, says FM

No proposal to bring fuels under GST, says FM

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New Delhi: Amid the prevailing record-high fuel prices across the country, Finance Minister Nirmala Sitharaman said on Monday that there is no proposal until now to bring crude oil, petrol, diesel, jet fuel (ATF) and natural gas under the Goods and Services Tax (GST).

“At present, there is no proposal to bring crude petroleum, petrol, diesel, ATF and natural gas under GST,” she said in a written reply to a question in the Lok Sabha.

The law prescribes that the GST Council may recommend the date on which the GST would be levied on these fuels, viz., petroleum crude, high-speed diesel, motor spirit (commonly known as petrol), natural gas and ATF.

“So far, the Council, in which the states are also represented, has not made any recommendation for inclusion of these goods under GST,” she said.

The Council may consider the issue of inclusion of these five petroleum products at a time it considers appropriate keeping in view all the relevant factors, including revenue implications, she added.

When the GST was introduced on July 1, 2017, amalgamating over a dozen central and state levies, five commodities–crude oil, natural gas, petrol, diesel, and aviation turbine fuel (ATF)–were kept out of its purview given the revenue dependence of the central and state governments on this sector.

The central government continued to levy excise duty on them while state governments charged VAT. These taxes, with excise duty, in particular, have been raised periodically.

While the taxes have not come down, a spike in global oil prices on-demand recovery has pushed petrol and diesel to an all-time high, leading to demand for them to be brought under the GST.

In recent weeks, Sitharaman had talked of the inclusion of fuel under GST as well as centre and states taking a joint call on cutting taxes to cushion consumers against the spike in retail prices.

To a separate question, Union Minister of State for Finance Anurag Singh Thakur said excise duty on petrol was Rs. 19.98 per litre a year back and is Rs 32.9 now. Similarly, on diesel, the excise duty has been raised from Rs 15.83 to Rs 31.8 per litre.

“The excise duty rates have been calibrated to generate resources for infrastructure and other developmental items of expenditure keeping in view the present fiscal position,” he said giving reasons for raising the levy.

On the impact of higher fuel rates on general prices, he said ‘petrol for vehicle’ inflation has increased from 7.38 per cent in January 2020 to 12.53 per cent in January 2021.

Similarly, ‘diesel for vehicle’ inflation has increased from 6.44 per cent in January last year to 12.79 per cent this year, he said.

On fuel pricing, Thakur said the prices of petroleum products in the country are benchmarked to international product prices.

“Generally, the price of petroleum products in the country are higher/lower than other countries due to a variety of factors, including prevailing tax regime and subsidy compensations by the respective Governments,” he said.

The government ended subsidies on petrol in 2010 and on diesel in 2014. ATF pricing was freed in 2002.



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