Economy

Centre wants to reduce fuel prices by bringing it under GST, but many opposition ruled states oppose fearing loss of revenue

Fuel prices are zooming past the century mark causing hardships to the common man. Central and State taxes combined account for approximately 50% of the fuel prices, GST will reduce the same bringing down the overall fuel prices.

The 45th GST council is meeting on Friday in Lucknow and will likely discuss bringing petrol, diesel, and other fuel products under its ambit. This can significantly reduce fuel prices as currently, state & central taxes form a substantial chunk of it. Central taxes are about 30% and state taxes are about 20% on petroleum products currently.

According to a report by Hindustan Times, this move may bring petrol price to ₹75 per liter, and diesel to ₹68 per liter. Kerala high court in June had issued directions to decide on including petrol and diesel under the ambit of GST, the meeting is taking place due to the same reason.

Throughout 2020 as crude oil prices dropped central government increased taxes on fuel, soon states also followed the suit to make up for the lost revenue due to the pandemic. This made the fuel prices to shoot past the 100 mark in many states. However many opposition-ruled states like Kerala and Maharashtra are opposing this move fearing loss of revenue.

Kerala Finance Minister K N Balagopal said the state will strongly oppose if there is any move to bring petrol and diesel under the GST regime. He said the fuel prices skyrocketed due to the huge increase of its cess by the Centre and if the Union Government reduces the cess, that will help in bringing down the prices of petrol and diesel. If petrol and diesel are brought under the GST regime, Kerala will lose ₹8,000 crores annually, the minister said.

Maharashtra Deputy Chief Minister and Finance Minister Ajit Pawar has said any attempt by the Union government to alter tax structures that adversely impact states’ revenue generation will be opposed. “Although nobody is speaking in public, there is a serious move on part of the Centre to bring petrol and diesel under GST citing one nation, one tax regime. While the centre has the right to evolve its own rules, any policy decision that adversely affects state revenue is not acceptable. In the name of the uniform tax regime, if states’ right to taxation are curbed it will be opposed tooth and nail,” he said ahead of the meeting on Friday.

The GST council has also proposed to consider Zomato and Swiggy as restaurants and levy a 5% GST on their services.

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