Ever wonder why do we pay so much for petroleum fuel products? Because there are literally layers of taxes, VAT and excise duties applied on them. While most of the items are covered under GST in India now, petroleum products are still governed under VAT system; but if it is changed to GST, the prices of petrol could fall to as low as Rs 38 after applying 12% GST!

India has now officially witnessed three-year high prices of petroleum products with petrol costing Rs 70-80 per litre, while diesel costs about Rs 50 per litre in Delhi. The only way curb continuously rising petroleum prices and rationalise its cost is its inclusion in GST regime. That’s not what I am saying, that is the statement given by Petroleum Minister Dharmendra Pradhan. So let’s get ourselves into some calculation to understand it better?

As per data provided by Indian Oil Corps for petrol prices in Delhi, the actual cost of fuel at refineries is just Rs 26.65 per litre. The dealers get it at Rs 30.70 per litre but it is sold at Rs 70.3, which means we pay Rs 39.41 more than the actual cost – thanks to all the tax components and dealer commission applied on every single litre of fuel we buy. And the amount of VAT levied varies from city to city – for example, Delhi charges a VAT of 27 per cent on petrol while it is 47.64 per cent in Mumbai, Thane and Navi Mumbai. That translates into a difference of Rs 9 a litre, considering the above mentioned prices! This applies to diesel as well.

Oh and that’s not if, we mustn’t forget the excise duty levied by the Centre for both petrol and diesel. Back in 2014, 54% excise duty was applied on petrol but with a mega-boost of 46%, it is now as high as 73% of the total cost of petrol per litre. To our surprise, the excise duty on diesel has gone up by 154 per cent, VAT by 48 per cent and dealer’s commission by 73 per cent. So with a combined taxation system for Central Government and the State Governments of India brings petroleum prices to a three-year-old high record, while crude oil has become cheaper by half!

So why exactly aren’t petroleum products covered under GST regime? I mean if it has to be taken under GST, we can’t expect it to be lower than 12% rate, but even if we apply that rate – petrol and diesel would be substantially cheaper. At 12 per cent GST, the petrol will be sold at Rs 38.1 in Delhi – almost Rs 32 cheaper than the current rate for one litre of the fuel. 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 which is still about Rs 27 cheaper! The same goes for diesel too –  its current price in Delhi is Rs 58.72 per litre. At 12 per cent GST, diesel will sell at Rs 36.65 in the national capital. At 18 per cent GST, diesel will cost Rs 38.61 and even if SUV cess is imposed, the customers will have to pay Rs 49.08 for a litre of the fuel – still Rs 9.64 cheaper than the existing rate.

Again, why on Earth isn’t the government taking fuel under GST! Well, because as per GST Act, this decision can only be made by GST Council and we all know that the body has huge influence from state governance bodies and representatives – who aren’t simply ready to let go the golden egg laying hen off the hands; but petroleum rates could be cut into half across India – it is really as easy as applying GST.

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