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Petrol, diesel to remain outside GST regime for a decade, says Sushil Modi

Petrol, diesel to remain outside GST regime for a decade, says Sushil Modi

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Virendra Pandit 

New Delhi: On a day the state-owned oil marketing companies (OMCs) marginally reduced petrol and diesel prices for the first time in a year, following a steep decline in global crude oil prices, senior BJP leader Sushil Kumar Modi said that it is not possible to bring the two fuels under the GST regime for the next 8-10 years as it would entail an annual revenue loss of Rs 2 lakh crore to the states.

“It is not possible to bring petrol and diesel under the GST regime in the next eight to 10 years because states would not be ready for a collective annual revenue loss of Rs 2 lakh crore”, Modi told the Rajya Sabha on Wednesday.

“If petrol or diesel would be brought under the Goods and Services Tax (GST) regime then how would the loss of Rs 2 lakh crore revenue to the states be recovered. The Centre and states together earn over Rs 5 lakh crore from tax on petroleum products,” he said.

The Wednesday price cut on petrol and diesel is the first in more than a year. The prices were last reduced on March 16, 2020.

On Wednesday, petrol and diesel prices were slashed by 18 paise per litre on petrol and 17 paise on diesel, respectively, after a steep decline in global prices due to the re-imposition of lockdowns and fresh economic woes amid rising cases of Covid-19 in several countries.

Taxes levied by the Centre and states constitute more than half of petroleum products prices, accounting for 60 per cent of the retail cost of petrol and 54 per cent of diesel. The government had recently confessed that it was earning Rs 32.98 per litre on retail petrol and Rs 31.83 on diesel as excise duty. This taxation was necessary to fund the government’s projects.

India is the third-largest guzzler of petrol products, importing 80 per cent of crude oil for domestic consumption. In the last two fiscals, the Centre spent USD 111.9 billion and USD 101.4 billion, respectively, on crude oil imports, according to Petroleum Planning & Analysis Cell (PPAC) data.

The explanation of Sushil Modi, who, as the then Bihar Finance Minister, was one of the architects for the GST regime’s rollout, assumes significance in view of the rise in petrol price which touched even Rs 100 per litre in some states recently.

He said the rates have been reduced across the country and vary from state-to-state depending on the local incidence of taxation, i.e. value-added tax (VAT).

If petroleum products are brought under the GST, 28 per cent tax would be collected on them, being the highest slab in the tax regime. “At present,, 60 per cent tax is being collected on petroleum products. This would result in a shortfall of Rs 2 lakh crore to 2.5 lakh crore (to both Centre and states),” he explained in the House.

“If we collect 28 per cent tax on petroleum products, then only Rs 14 would be collected (per litre) against Rs 60 at present,” he pointed out.

“If petrol or diesel price is Rs 100 (per litre) then the tax component is Rs 60 which includes Rs 35 for Centre and Rs 25 for respective states. Besides out of the Rs 35 tax per litre, 42 per cent goes to states,” Modi revealed.

”It is said that tax collected on petrol, diesel goes into the pocket of the government. There is no separate pocket of the government. From where the money will come for providing electricity and tap water to all households. The spending of tax collection on the welfare of the country is being challenged.”

Reacting to remarks against the GST regime, he said, “Some people also said that this is Gabbar Singh Tax. No state has opposed the tax structure of GST in any GST Council meeting. You can see the proceedings of the council (to verify that),” he said.

He stressed that only the government under the leadership of Prime Minister Narendra Modi had the guts to implement the GST regime in the country.



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