The central government is not interested in lowering the excise tax on fuel, even if gasoline and diesel prices remain at record levels across the country.
Currently, taxes on gasoline and diesel in the country are the highest in the world. It should be noted that the center charges 32.90 rupees per liter of excise tax on gasoline and 31.80 rupees per liter on diesel.
In recent interactions, senior government officials said it would be difficult for the central government to cut excise taxes on fuel prices, citing the increased spending incurred during the Covid-19 pandemic.
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A few days ago, Union Oil Minister Dharmendra Pradhan said government spending increased during the second wave of the pandemic due to vaccinations and other social programs.
He also accused some states of levying high value-added tax (VAT). Rajasthan, Maharashtra, Madhya Pradesh and Telangana are some states where VAT rates are higher compared to the national average of 23 rupees per liter.
Meanwhile, Treasury Secretary Nirmala Sitharaman claims that the center and states need to discuss the situation as both parties are involved.
However, even states are not interested in lowering the VAT they levy on fuel and are citing the current economic situation. They also accuse the center of imposing high excise taxes on gasoline and diesel.
As things stand, both the central government and states agree that fuel prices are high, but have not come up with a plan to ease the burden on citizens. The burden could increase if international crude oil prices continue to rise.
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NO PROPOSAL FROM STATES FOR GST ADMISSION
While lowering high fuel taxes is one way of lowering fuel prices, incorporating petroleum production into the goods and services tax (GST) is another way.
The Finance Minister recently said there is no hurdle on the part of the center to include petroleum products in the GST, but added that the GST Council has sole power to take a phone call on the matter. The GST Council is a joint forum between the center and states under the direction of Finance Minister Nirmala Sitharaman.
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Several reports suggest states are reluctant to bring petroleum products under the GST. It seems that states don’t want to lose any revenue either, as the VAT they generate from fuel sales is much higher than what they would earn under the highest tax plate (28 percent) of GST.
Given the circumstances, a decision to bring petroleum products under the GST also seems far-fetched and citizens may have no choice but to contend with higher fuel prices. Your only hope is a decrease in international crude oil prices.
As a small glimmer of hope, international crude oil prices have fallen sharply in recent days due to increasing uncertainty in the face of rising Covid-19 cases and a failed meeting of the OPEC + nations.
It should be noted that gasoline prices have already exceeded 100 rupees per liter in two dozen cities, including Delhi, Kolkata, Chennai and Mumbai. The price of diesel has also passed the three-digit mark in Rajasthan’s Sri Ganganagar and remains above 90 rupees per liter in most other cities.
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