Petrol prices crossed Rs 100 a liter in many cities of the country, but the Modi government is strongly considering reducing its price.
According to the news agency Reuters, the finance ministry has discussed with some states, oil companies and the petroleum ministry to reduce the tax on petrol and diesel prices.
According to sources, the Finance Ministry wants to find a way that provides relief to the general public and also does not affect the income of the government.
First Way: Central Government Excise and State Governments Reduce VAT
Due to the continuous increase in the price of crude oil, Government oil companies in India are continuously increasing the price of diesel and petrol.
In February itself, petrol and diesel have increased by about Rs 5 a liter. At the same time, the price of crude oil has doubled in the last 10 months, which has affected the price of oil in the domestic market ie India.
The inflation burden of oil to the Indian people has increased slightly due to the central and state governments taxes.
Second Way: Petrol and Diesel come under the purview of GST
A few days ago, Chief Economic Advisor (CEA) KV Subramaniam supported the proposal to bring petroleum products under the ambit of Goods and Services Tax (GST).
Subramaniam said in a recent India discussion with FICCI FLO members, “It will be a good move.” Dharmendra Pradhan, Petroleum Minister has also requested Union Nirmala Sitharaman, Union Finance Minister to bring petroleum products under GST.
At the same time, if the GST Council executes the suggestions of Petroleum Minister Dharmendra Pradhan, then the prices of petrol and diesel in the country will be halved.
Petroleum Minister Dharmendra Pradhan said that his ministry is constantly requesting the GST Council to include petroleum products within its ambit, as it would benefit the people. Finance Minister Nirmala Sitharaman has also given some similar indications.
These states reduced VAT
To reduce this burden, the central government will have to reduce excise duty and state governments will have to reduce VAT.
The government of Assam, Rajasthan, Meghalaya, West Bengal, and Puducherry have already provided some relief to the general public by reducing VAT.
VAT on diesel and petrol was first reduced by Rajasthan state. In Rajasthan, on January 29, VAT was increased from 38 per cent to 36 per cent.
Assam reduced tax by Rs 5 on 12 February, while Meghalaya gave the most relief. Here Meghalaya government reduced on diesel by Rs 7.10 and petrol by Rs 7.40.
Petrol-diesel is getting expensive due to tax. The central government levies excise and state VAT.
Right now the state governments and the central government are collecting more than 100% tax in the name of VAT and excise.
The rates of these two are so high that petrol of 35 rupees is reaching 90 to 100 rupees per liter in the states.
This will affect the petrol and diesel rates.
- If diesel and petrol are kept at a higher rate of GST, then the current prices can be reduced to 50%.
- If the GST Council kept in 5% slab, then petrol prices could come down.
- There are four primary GST rates in India – 5%, 12%, 18% and 28%.
- If petrol is kept in a 5 percent GST slab, it will be between 37 to 38 a liter across the country and the diesel rate will be reduced to between 38 to 39.
- If fuel is kept in 12 percent slab, then petrol price will be between 40 to 41 and diesel also will be between 40 to 41 rupees.
- If petrol comes in the 18 percent GST slab, then the price will be between Rs 42 to 43 and diesel will be between Rs 42 to 43.
At the same time, if the fuel is kept in the slab of 28 percent, then petrol will be between Rs 45 to 46 and diesel will be between Rs 46 to 47.
Here is a problem
States are not ready to bring petrol and diesel under the GST regime. GST was implemented on 1 July 2017.
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Petrol and diesel were kept out of it at that time due to the high dependence of the states.