Oil Minister Hardeep Singh Puri said on Tuesday that the Ministry of Petroleum and Natural Gas (MoPNG) will work on bringing petrol, diesel, and ATF under the goods and services tax (GST).

Asked about imposing GST on these fuels, Puri said, “We will try. The Minister of State (Suressh Gopi) and I will both work on it.”

Sources said that to levy GST on petrol, diesel, and aviation turbine fuel (ATF), the MoPNG has to make a recommendation to the Finance Ministry, which in turn will present the same at the meeting of the GST Council.

Both Puri and Gopi took charge of the ministry on Tuesday.

GST on petrol and diesel

“At present, crude oil, petrol (MS), diesel (HSD), ATF, and natural gas are part of GST. However, under Subsection 5 of Section 12 of the 101st Constitutional Amendment Act, the GST Council shall recommend the date on which the tax has to be levied on such products. The GST Council has to just decide which date it wants to levy it,” said one of the sources.

At present, the centre levies excise duty on auto fuels, while States impose value-added tax (VAT) and sales tax.

Levying GST on the two auto fuels and crude oil has been a long-standing demand as it would bring down their prices, benefiting the common man. Almost every political party has advocated for the same thing at some point.

However, there has not been a consensus on this issue at the GST Council. The general fear is that States and centre will take a hit in terms of tax revenue.

In FY24 (provisional), the total contribution of the petroleum sector to the government exchequer stood at around ₹7.51-lakh crore, of which the centre’s share was ₹4.32-lakh crore and the State’s at ₹3.18-lakh crore. In FY23, the contribution stood at around ₹7.48-lakh crore, with the Centre getting ₹4.28-lakh crore and States receiving ₹3.20-lakh crore.

Another issue is that the maximum rate of tax under GST can be 50 per cent, including cess. However, the rate of tax on petrol and diesel is more than 60 per cent. At present, the current rate of tax on diesel is 50.76 per cent. This is calculated by taking the base price in Delhi as of March 16, 2024, which is the last date of revision. The tax on petrol or motor spirit was 63.4 per cent as of March 16, according to another source.

“This is against the principle of revenue neutral rate (RNR),” the source added.

Source: The Hindu Business Line