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GST Council leaves petrol, diesel outside GST regime, slashes tax on biodiesel

The 45th meeting of the Goods and Services Tax (GST) Council has decided against bringing petrol and diesel within the GST regime
GST Council leaves petrol, diesel outside GST regime, slashes tax on biodiesel
GST Council leaves petrol, diesel outside GST regime, slashes tax on biodiesel
  • GST Council members made it clear they do not want petroleum products to be included under GST, said Nirmala Sitharaman
  • The GST Council has, however, decided to cut the tax on biodiesel, which is supplied to oil marketing companies (OMCs) for blending, from 12 percent to 5 percent

Lucknow: The 45th meeting of the Goods and Services Tax (GST) Council has decided against bringing petrol and diesel within the GST regime, dampening hopes of some respite for consumers who have seen the fuel prices touch record highs over the past few months. The GST Council had been directed by the Kerala High Court to consider bringing petrol and diesel within its framework. Addressing a press conference on Friday evening, Finance Minister Nirmala Sitharaman said, “There has been lot of media speculation on whether petroleum products will be brought under ambit of GST. I make it absolutely clear that this came on today’s agenda purely because of the Kerala High Court order where it suggested the matter to be placed before GST Council, GST Council members made it clear they do not want petroleum products to be included under GST.”

“It was decided, we will report to Kerala HC that, matter has been discussed & Council felt it was not the time to bring petroleum products under GST,” she added.

Govt levies make 60% of petrol prices

In the backdrop of a financial crunch induced by the COVID-19 pandemic, the Narendra Modi government has repeatedly raised sales taxes to cushion public finances. Taxes make up around 60 percent of the retail price of fuels and taxes on gasoline and diesel have surged around six times since 2013. Experts believed that bringing petrol and diesel within GST would reduce the burden of taxes on the fuels.

However, the government has time and again only expressed its inability to intervene and control prices since the prices are market-controlled since 2010. The Centre has also been reluctant to slash taxes in order to cool off fuel prices, saying that its tax collection has been hit severely in the wake of the COVID-19 pandemic. PSU Watch had earlier reported that the government has collected Rs 3,34,894 crore central excise duty on petrol and diesel in FY20, and Rs 94,181 crore in FY22 so far.

GST on biodiesel cut from 12% to 5%

The GST Council has, however, decided to cut the tax on biodiesel, which is supplied to oil marketing companies (OMCs) for blending, from 12 percent to 5 percent. Biodiesel is a form of diesel fuel derived from plants or animals and consisting of long-chain fatty acid esters. It is typically made by chemically reacting lipids such as animal fat, soybean oil, or some other vegetable oil with an alcohol, producing a methyl, ethyl or propyl ester by the process of transesterification. The government has placed a lot of emphasis on increasing the percentage of blending of diesel in order to cut its reliance on import of crude oil and to facilitate a switch towards relatively cleaner energy. According to the target set by the Centre, India is expected to achieve 20 percent ethanol blending of fuels by 2025. 

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