Petrol prices could almost halve if brought under GST
Petroleum Minister Dharmendra Pradhan had on Wednesday said that the government is thinking about bringing fuels prices under the ambit of GST which will lessen the price burden on consumers.
The government has so far excluded petrol and diesel from the ambit of GST, but they still attract state and central levies such as excise duty and VAT. Different states have different rates of VAT applicable on petroleum products.
The pertinent question here is that why petrol diesel prices are still hovering between Rs 70-80 when the crude prices have fallen significantly since 2014. The answer lies in the pricing structure of petrol and diesel.
Centre imposes excise duty on petrol and diesel. A report says that excise duty on petrol has increased by 54 per cent since November 2014.
The government had between November 2014 and January 2016 raised excise duty on petrol and diesel on nine occasions to take away gains arising from plummeting international oil prices.
According to data released by the IOC, the cost of fuel in refineries is Rs 26.65 per litre and the dealers get it for Rs 30.70 per litre. The final selling price depends on the excise duty and VAT imposed by the states. Delhi charges a VAT of 27 per cent on petrol while it is 47.64 per cent in Mumbai, Thane and Navi Mumbai, said an India Today report.
If brought under the GST...
The petrol and diesel prices are likely to become significantly cheaper if brought under the GST as the new tax regime has slabs of 5, 12, 18 and 28 per cent. Even if petrol is taxed at 12 percent, the petrol will be sold at Rs 38.1 in Delhi which almost the half of what it is being sold at in Delhi. At 18 per cent, petrol will be 40.05 a litre in Delhi while at 28 per cent, it will cost Rs 43.44 per litre.
Five petroleum items - crude oil, natural gas, motor spirit, high speed diesel and aviation turbine fuel have been kept out of the GST as of now.
The fuel prices are at their peak in the last three years. The petrol price is almost touching Rs 80 a litre in Mumbai.
Petrol price in Delhi on Tuesday was at Rs 70.38 per litre, whereas in Mumbai a litre of petrol costs Rs 79.48. In Chennai, the price of petrol is Rs 72.95 while in Kolkata it is Rs 73.12. In the month of September itself, the petrol price on an average has gone up by almost 1.53-1.80 per cent while that of diesel by 2.78-2.96 per cent.