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GST on petrol has been a contentious issue since the implementation of the Goods and Services Tax (GST) law in India. Certain developments since 2021 have led industries across the country to believe that the GST Council may decide to charge GST on petrol and petroleum products, which is otherwise currently out of its sight.
With the implementation of GST, many ask questions such as ‘Is GST applicable on petrol?’ and ‘How much GST on petrol in India?’. However, there is no GST being levied on petrol at present. The tax on petrol varies with every state/UT. There is an imposition of central excise duty on the base price and state VAT on the dealer’s commission.
Section 9 of the CGST Act states that GST on petrol crude and diesel, GST on motor spirit, natural gas and aviation turbine fuel shall apply from a date that government will notify. The government has not notified any date for levying GST on petroleum products. Further, Article 279A of the Indian Constitution mentions that the GST Council shall have the authority to decide the date of implementing GST on petrol in India.
From all the discussions between the Centre and states at the GST Council meetings so far, a maximum GST rate of 28% could be levied on petrol along with cess.
Hence, presently, the regulation of petrol prices falls under state control. The consent of all state governments to bring petrol and diesel under GST is still being debated. Once petrol and petroleum products come under the GST regime, the Centre may begin to monitor the pricing.
However, there are petroleum products (other than crude) used directly as raw material in industries that attract GST with the respective HSN codes as follows-
|Particulars||HSN code||GST rate|
|Petroleum Gases in liquified form||27111900||5%|
|Petroleum Gases in gaseous state||27112100||18%|
|Petroleum Oils And Oils Obtained From Bituminous Minerals, Other Than Crude, with the weight of 70% or more of Petroleum Oils||27109100||18%|
|Raw petroleum coke for node making used in the Aluminium Industry as per Standard Is 17049||27131110||18%|
|Liquified petroleum gas or LPG supplied to non-domestic, exempted category (NDEC) customers by companies such as IOC, HP or BP||27111200||5%|
|Petroleum jelly||27129010, 90||18%|
Bringing petrol and similar items under the GST ambit will put the consumers in a relatively better position. For instance, currently, taxes eat up to 40-50% of the petrol price you pay. Under GST, the maximum tax outflow charged is 40% (20% each is the maximum SGST or CGST).
If petroleum crude, high-speed diesel, motor spirit (also known as petrol), natural gas and aviation turbine fuel are even charged at the current maximum tax slab of 28%, consumers will be paying a lesser price than they are presently paying for it. Under GST, there will be a considerable price drop!
To know the price drop benefit, take a look at the current and possible prices of fuel-
|Present Day under excise and VAT||Possible future under GST|
|Particulars||Amount (Rs.) per litre||Particulars||Amount (Rs.) per litre|
|A. Fuel cost (Petrol) (Including freight)||57.35||A. Fuel cost (Petrol) (Including freight)||57.35|
|B. Excise duty (19.90/litre)||19.9||B. Dealer commission per litre||3.87|
|C. Dealer’s commission per litre||3.87||C. Total value (A+B)||61.22|
|D. Total value (A+B+C)||81.12||GST (assumed and taken highest slab of 28% on C)||17.14|
|VAT (Delhi) @ 19.4% on D||15.74|
|Retail price of petrol (RSP)||96.86||Retail price of petrol (RSP)||78.36|
From the above table, we can see that the petrol price under GST is less than the current petrol price. Even if the rate of pre-GST excise and average VAT rate put together is carried forward in the GST regime, the consumers are in a better position due to the removal of any cascading effect of taxes. Further, if the GST rate is raised to 40%, still the consumers benefit from the price reduction. However, there is a higher chance that a new tax slab may be created for petrol.
Different VAT rates across states lead to price differentiation with some states losing revenue while a few others enjoy an increase in revenue. The unanimous approval by the state governments may take time as bringing these items under GST will ensure one price for these items throughout the nation. Therefore, the benefits of Interstate price differentiations might be lost.
“Measures taken by the Centre such as reducing the excise duty on petrol have helped India protect itself from any sharp rise in fuel prices”, claimed the Union Petroleum and Natural Gas Minister, Shri Hardeep Singh Puri.
These items may be brought under the GST regime after the government reaches a point when they can earn what they were earning prior to the implementation of GST and recover the loss earned after GST was implemented.
Aviation Turbine Fuels attracts 5% GST if it falls under the HSN code 27101939. Whereas, petroleum oils and oils extracted from bituminous minerals already attract a GST of 18%. Any nature of petroleum gas attracts a GST of 18%.
The government and the GST Council are yet to finalise any rate for petroleum crude, diesel, and natural gas.
GST on petroleum oil, extracted from bituminous minerals currently attracts an 18% rate.
GST on fuel, assuming Aviation Turbine Fuels fall under HSN code 27101939 attract 5% GST.
Currently, VAT is being charged on the sale of petrol in Gujarat or any other state.
No, there are no GST notifications issued so far on petroleum products. The GST Council is yet to take any decision on imposing GST on petrol and diesel, or other petroleum products.
Transportation of natural gas using a pipeline will attract a 5% GST rate without input tax credits or a 12% GST rate with a full claim of the input tax credit. Regarding the transportation of petrol, the taxpayer must pay tax on a reverse charge basis for the transportation of non-GST goods if a Goods Transport Agency (GTA) service is being used. The standard GST rate of 5 or 12% or 18% would apply depending on the scenarios and mode of transportation.
Some of the states opposing GST on petrol include Maharashtra, Madhya Pradesh, Rajasthan, and Kerala, among others.
Currently, VAT is being charged on the sale of petrol in Maharashtra or any other state.