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Why Fuel Prices will not Change after GST. Hidden Truth on Petrol, Diesel Prices

Why Fuel Prices will not Change after GST. Hidden Truth on Petrol, Diesel Prices

Petrol and Diesel Prices are expected to change significantly after GST. Important Facts on Present Taxes and Future Taxes after GST on Petroleum Prices in India

 

Why Fuel Price will not change after GST

Considering a significant Price reduction after GST on Petrol and Diesel Prices, well - its a gimmick and those considering it as expectation need to understand the hard reality.

At Present - there are 2 Taxes been imposed by Government when Petroleum Prices are not part of GST

1. By Central Government - As Fixed Excise Duty of Rs 19.48 per Litre on Petrol and Rs 15.33 per Litre on Diesel. However - the excise duty even has its breakup and it includes road cess of Rs 8 per Litre.

Thus it means effectively - Rs 11.48 per Litre excise + Rs 8 per Litre road cess charged on Petrol. While Rs 7.33 per Litre excise + Rs 8 per Litre road cess charged on Diesel. The Final Tax is what called Excise Duty

2. By State Government - As Differential VAT imposed state wise on Petrol and Diesel Fuel. which varies from State to State. Like Delhi imposes 27% on Petrol & 16.75% on Diesel + 25p as Pollution Cess with Surcharge. While Mumbai has 39% on Petrol, some other states have other VAT

 

Scenario Post GST on Petrol and Diesel Prices

As no where in the entire world, the Petroleum prices are purely under GST. Thus the VAT will continue getting imposed on. But the Final Taxation would  be 2 Way Split

Post GST - it would be likely 2 way Split.

1. By Central Government : GST + Road Cess

2. By State Government - VAT will continue to be charged in

 

GST on Petrol and Diesel (instead of Excise Duty)

The Present Excise duty as led by Central Government could possibly come under GST. They may introduce in

» 28% as peak Excise Duty on Petrol

» 18% as peak Excise Duty on Diesel

Additional would be Road Cess of Rs 8 per Litre

With 28% GST on Petrol and 18% GST on Diesel - this effectively means Rs 10.64 on Petrol and Rs 7.2 per Litre on Diesel (considering fact, At Present at time of writing this post - Basic cost of Fuel after refining is around Rs 38 per Litre in Petrol and around Rs 40 per Litre in Diesel)Additional would be Road Cess of Rs 8 per Litre.  Thus the final GST Duty would likely turn out to be Rs 18.64 per Litre on Petrol and Rs 15.2 per Litre on Diesel

Lets Compare the Present Excise Duty as getting charged in with the Post GST Regime

1. On petrol - Existing Pre GST Regime its Rs 19.48 per Litre, which will be reduced to Rs 18.64 per Litre = Yes, Price will reduce by Rs 84 paise

1. On Diesel - Existing Pre GST Regime its Rs 15.33 per Litre, which will be reduced to Rs 15.2 per Litre = Yes, Price will reduce by Rs 13 paise

Also, to be noted that if International Prices will increase then it will also lead to Increase in prices due to GST Calculated as Percentage

 

State VAT 

Then - the State VAT would continue getting applicable as per present slabs.

Will continue charging in VAT. As no where in the entire world, the Petroleum prices are purely under GST. Thus the VAT will continue getting imposed on. Thus - the present Slabs will be same

 

Final Reality Check on Petroleum Prices post GST

Setting an expectation of Magic in terms of much lower Fuel Prices is a wrong expectation. Government is getting highest taxes in form of Indirect taxes it applies on Petrol and Diesel. In - no way its going to hit in this revenue

The same feeling was felt when Car Prices were assumed to fall in significantly post GST and they did fall in initially for Luxury Cars, but within 2 months of GST roll out - prices were increased due to revised cess and the final pricing infact increased to more than it was in Pre GST Scenario 

Thus - any expectation if set for Fuel price reduction after GST is more a farce.

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Wednesday, 12 August 2020

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