Debate on Including Petrol and Diesel Under GST Amid Rising Oil Prices

Original: Should Petrol/Diesel Be Under GST? War Impact On Crude Raises Big Question

Ndtv•Apr 5, 20264 min

In a Nutshell

The ongoing conflict in the Middle East has caused crude oil prices to surge, prompting discussions on whether petrol and diesel should be included under the Goods and Services Tax (GST) regime in India. While the central government has reduced excise duties, state governments have not lowered their VAT, raising concerns about federalism and state revenues.

Key Points

01Crude oil prices have surged to $120.84 per barrel, a 75% increase since February.
02The central government reduced excise duty on fuels, but states have maintained high VAT rates.
03States collected over ₹3 lakh crore in VAT/sales tax on petroleum products in the 2024-25 financial year.
04Bringing fuels under GST could standardize prices but faces resistance from state governments.
05Experts suggest that GST inclusion could alleviate economic pressures on petroleum companies.

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Full Summary

The conflict in the Middle East and Iran's blockade of the Strait of Hormuz have led to a significant increase in global oil prices, with the cost of crude oil reaching $120.84 per barrel, a 75% rise since February. In response, the Indian government reduced excise duties on petrol and diesel to mitigate the impact on consumers. However, state governments have not followed suit, maintaining high VAT rates that generate substantial revenue—over ₹3 lakh crore in the 2024-25 financial year. This situation has sparked a debate on whether petrol and diesel should be included under the Goods and Services Tax (GST) regime to create uniform pricing across states. While this could prevent price discrepancies, it faces significant opposition from state governments concerned about losing revenue and centralizing power. Experts like Kirit Parikh advocate for GST inclusion as a means to alleviate financial burdens on petroleum companies amid rising global prices.

Key Figures

$120.84

Cost per barrel of crude oil (Indian Basket)

₹3 lakh crore

Total VAT/sales tax collected by states on petroleum products in the 2024-25 financial year

75%

Increase in crude oil price since February

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Why It Matters

The decision on whether to include petrol and diesel under GST could lead to lower fuel prices for consumers but may also affect state revenues significantly.

Who is affected

Consumers, state governments, and petroleum companies.

What to know

Citizens should stay informed about potential changes in fuel pricing and tax structures.

FAQ

Crude oil prices are rising due to the conflict in the Middle East and Iran's blockade of the Strait of Hormuz.

VAT contributes significantly to fuel prices, with states collecting substantial revenue from it, which is critical for their economies.

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