GST: What Will be the Impact of GST on Petrol/Diesel Price?

Introduction of GST on July 1st, 2017 was the biggest tax reform in India. By now everyone knows that Goods and Services Tax is a unified tax which incorporated all the taxes into one and further a certain percentage of the total tax goes to the Central exchequer and the rest to the State exchequer. GST is applicable on almost all goods and services that one can think of however so far petroleum products i.e. petrol, diesel, jet fuel and natural gas have not been brought under the ambit of GST so as to maintain the revenue that the States earn from these petroleum products.

After the rollout of GST, although petroleum products were not covered under the Goods and Services Tax, however, a significant change that happened was that the prices of petrol and diesel started being revised or changed daily as opposed to the previous system of fortnightly revision of prices. The Government stated that their motive behind this move was to give the consumer the benefit of any reduction in prices at the International level and also to ease out the effect of any sharp rise in prices of these products, on the consumer. In the same context, Oil Minister Dharmendra Pradhan tweeted, “Prices have stabilised & will soften in the coming days. With Daily Price Revision in place, it will be immediately passed on to consumers.”

The effect of this has been seen in Delhi where the highest prices of petrol since August 2014 have been recorded at ₹70.38 per litre and the diesel rates have touched ₹58.72.

On September 13, Oil Minister stated that the petroleum products must soon be brought under the purview of GST as it is the only way to have stable and rational fuel prices in India.

"It is high time GST Council should consider bringing the petroleum products in the ambit of GST," stated Dharmendra Pradhan.

As per Chapter III Levy and Collection of Tax of Central Goods and Services Tax act, 2017 -

"9.(2) The central tax on the supply of petroleum crude, high-speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council."

Mr Pradhan also stated that the government expects fuel prices to come down in coming days. The minister also clarified that the petroleum prices depend on many factors than just the price of crude petrol. “Prices of Petrol/Diesel are linked with the product prices in the International Market. Crude Price is just one component of it.” tweeted Pradhan.

It is believed that if petroleum products are brought under the purview of GST then the prices of petrol as well as diesel would be the same all over India due to One Nation – One Tax.