WHY EVERYONE IN INDIA WANTS PETROL AND DIESEL UNDER GST
Before going to the actual reason let understand the basic of goods and service tax,why it is necessary,its different types and different gst rates in india.
What is GST??
GST is an indirect tax system introduced in Indian to make the tax system simple.GST is introduced with the dream of one nation- one tax.
Earlier the Indian tax system is very complicated because there are so many taxes imposed on the goods and services, such as Entry tax ,octroi,Excise,customs,VAR which comes under goods tax and luxury tax, service tax, entertainment tax which comes under service tax. Due to this complex tax system foreign investors are not interested in investing in india.With the introduction of GST, it is expected that this indirect tax system will boost foreign direct investment (FDI) and increase export of goods and services.
What are different types of GST??
There are basically four types of GST which are listed below
IGST- Integrated Goods and services tax
CGST– Central Goods and services tax.
SGST– state Goods and services tax.
UTGST- union territory Goods and services tax
What are the different GST Rates??
There are basically four slabs of GST rates such as 5%, 12%, 18%, and 28%.
Branded rice and wheat, frozen vegetables, branded flour, cotton and cotton fabrics are considered under the 5% GST.cheese, butter, ayurvedic products, mobile phones and dry fruits are put under 12% GST. Footwear above 500 Rs price, hair oil, manmade products, biscuit, toothpaste, soap are put under 18% rates. Luxury cars, air conditioner, LED TV’s, cement, tobacco products are considered under 28% GST rate.
Why people want Petrol and Diesel under GST??
In May 2014 the international price of crude oil per barrel is around 106 US dollar and the price of petrol in Delhi in May is 71.40 Rs. In may 2018 the international crude oil price is reduced to 73 US dollar and the price of the petrol in Delhi in May 2018 is around 75.50.In may 2014 the price of diesel in Delhi is 56.50 Rs and in may 2018 the price of diesel is 68.1 Rs, which is equivalent to the price of petrol 1 year back.
If the international crude oil price is reduced, the petrol as well as Diesel price should also reduce same time. But why government is not reducing the oil prices.
Take an example of Delhi and look into the price break of petrol. The base price of petrol in Delhi is around 37.42 Rs, in this central government charges excise duty of 19.73 Rs which is 52% of base price. Apart from this the state government also levy 16.34 Rs as a VAT which is nearly 44% of base price and also there is around 3-4 Rs of dealer commission which makes the price of petrol around 77 Rs.This data is according to Indian Oil Corporation. For each litre of petrol, the Indian citizen pay tax equal to the base price of petrol.
The only solution to reduce price of the petrol is by bringing petrol and diesel under Goods and Service Tax (GST).Government has considered almost all the products under the GST but still petrol and Diesel comes under VAT. According to new tax system the government can impose tax at the rate of 5%, 12%, 18% and 28%.For luxurious items the tax is 28%.Petrol and diesel cannot be considered as a luxurious item.
If petrol and diesel are brought under GST than the tax rate should not be more than 12%.If suppose 12% GST is levied on petrol than the price of the petrol including dealer commission becomes 45.50 Rs. If 18% tax is levied than the price of petrol in Delhi becomes 47.80 Rs. If suppose petrol is considered as luxury goods, with 28% GST the price of the petrol becomes 51.50 Rs.
The decision to consider petrol and diesel under GST is vested on GST council as per the GST ACT, where the state representation is more. But all state government don’t want petrol and diesel under GST because petrol is main source of revenue for the state government. If the petrol and diesel are considered under GST than there will be more revenue loss for the state which state government don’t want. This is the reason why all the state government opposes petrol and Diesel under GST.