GST on Petrol and Diesel prices? That is the big question that will be tabled at the first in-person GST Council in 20 months. Finance Minister while chairing the meet in Lucknow will be faced with a tough decision on rising petrol prices and taking a hit on the revenue collection. Petrol prices are at record high and so is excise collection.
Currently, states charge VAT on petrol and diesel, which is on a value after adding the excise duty charged by the Centre. It leads to tax-on-tax or cascading effect, leading to higher cost. Over 50% of your fuel bill taxes to sates and centre.
GST Council can keep G the ST rate at a peak of 28% (CGST+SGST) and also add on a cess but that also can not exceed 40% of total value vs 50% taxation right now.
Fuel contributes to a large chunk of revenue of states, Kerala and Maharashtra have already expressed their opposition to the plan as it would make them even more dependent on compensation from the centre which is a 'opposition' govt.