Browsed by
Tag: Fuel prices

Why the government must move fuel to GST
Why the government must move fuel to GST

Why the government must move fuel to GST

Comments 0 Comment

Fuel prices have hit all-time highs. Petrol crossed Rs 80 a litre. Diesel hit new records too. Fuel prices are technically supposed to be market driven, linked to international crude prices and foreign exchange rates. Practically, they are not. Both central and state governments tax fuel; the rates have varied wildly over the years. Rounding off for simplicity, the Centre taxes petrol at Rs 20 a litre. State taxes vary, but say for Delhi, they are around Rs 17 a litre. Hence, taxes amount to Rs 37 a litre. Without these, petrol at pumps would cost only Rs 43 per litre. This implies a whopping 84% tax on petrol, way higher than even the high-end slab of GST (28%), the supposed catch-all tax for goods and services in the country.

While tax on fuel has always been high, the last few years have been exceptional. Four years ago, central tax on petrol was around Rs 9 per litre (vs Rs 20 now), while state taxes were Rs 14 a litre (vs Rs 17 now). If we simply went back to those levels, the current petrol price would be just Rs 63 per litre.

So what happened in the past four years? Well, crude oil prices fell. As per policy, pump prices should have dropped, reaching Rs 40 a litre. However, the government interfered and raised taxes, cleverly ensuring that final petrol prices at pumps remained unchanged. As a result, you the consumer lost the benefit of lower crude prices. The consumers didn’t notice. Maybe they were just happy the prices didn’t rise. The government, meanwhile, had a windfall as fuel-related revenues doubled. Rough estimates suggest the Centre now makes around Rs 3 lakh crore from taxes on petrol products, and the states another Rs 2 lakh crore. To put it in perspective, the entire Union budget is around Rs 24 lakh crore, making fuel taxes a nice chunk of the government’s income.

Now, depending on whose side you are on, you may like or dislike this move. Some may say this was the only way the government could have fiscal discipline, which we never had in the past few decades. The extra money can be used to reduce our debt and increase welfare schemes. Detractors will say the fuel tax increase was a ploy to gouge more out of the middle class, which is fleeced at any given chance. Of course, all these discussions should have happened a few years ago when tax rates were changed, but somehow it didn’t attract much notice then. Until now, when the low crude oil price party has ended.

Crude prices shot up again. The rupee fell. Now, the taxes raised a few years ago seem like a huge burden on the consumer. The opposition took the issue head on, striking a chord with the middle class. Whether the BJP government will buckle or not remains to be seen. So far they haven’t. Maybe they think the angst people feel is temporary — either crude prices will fall again or people will just accept the hike and move on.

However, to think record fuel prices will have no political cost would be a mistake. Almost every political party takes the middle class for granted. Robin Hood style, they take from the middle class and pass it on as welfare schemes to the poor. By doing this, they hope to win more votes than the people they upset. However, fuel prices matter to all Indians now more than ever before. The jump in prices not only affects affluent voters with big vehicles, but also those with bikes. It also eventually causes inflation, which directly affects the poor. Taxation has its limits, and when an essential commodity like fuel is taxed at 84%, people do see it as unfair.

Also Read : Why GST on petrol and diesel prices may not lower fuel prices

The ideal solution is to bring fuel under GST, anyway the right thing to do if you go by the spirit of GST as a universal indirect tax. If fuel moves to GST, petrol prices will be a mere Rs 55 a litre at current prices. Imagine the joy it would give to millions. Imagine the love GST would get, and the boost it would give to the economy.

Of course, a reduction in fuel taxes from 84% to 28% will mean a big hit to government revenue — of around Rs 2-3 lakh crore, or 10-15% of its spending. However, the government could, and should, have more creative ways to raise money — higher disinvestment, land sales, growing GDP faster and widening the tax net, for instance. Scaling back expenses and pulling out of schemes that don’t work can also help cover some of the shortfall. Finally, while deficit control is always important, sometimes it is important to let go. Loosen the purse strings when people are suffering too much.

The long-term solution, and something that could have prevented all this, is to consider fuel hedging, or locking in future purchase prices when crude prices are low.

Lowering fuel taxes is a chance for the government to give relief to the consumer, make the GST more comprehensive and take the arbitrariness out of taxation. While it won’t be easy to bridge the revenue gap, it’s about time we found more innovative ways to raise money than just taxing the middle class some more.


Ease Your GST Retrun Filing & Invoice with XaTTaX- GST Software

 

Source: https://goo.gl/GB9wJB
No pure GST on petrol, diesel; 28% tax plus VAT a possibility: Official

No pure GST on petrol, diesel; 28% tax plus VAT a possibility: Official

Comments 0 Comment

If petrol and diesel – the two fuels of mass consumption – were to be brought under the GST- PETROLGoods and Services Tax (GST) regime, they would be taxed at the peak slab of 28 per cent, along with the Value Added Tax (VAT) which would be imposed by the states.

A top government official, while speaking to news agency PTI, said the ‘28% GST + VAT’ module is being contemplated by the government to bring fuel under GST. Although this would negate the concept of single taxation – which was the prime rationale implementing GST – it would ensure the states would not incur losses.

 There is no pure GST on petrol and diesel anywhere in the world and so in India too it will have to be a combination of GST and VAT,” the official said.

With the imposition of VAT on top of GST, the fuel prices will hover at around the same rates at present even if they will be taxed under the GST module, claim experts.

At present, the tax on petrol and diesel is made up of the excise duty levied by the Centre, along with VAT imposed by states.

While the excise duty is kept fixed by the central government irrespective of the hovering prices, VAT is ad valorem — it is charged as a percentage of the fuel cost.

The incumbent excise rate on per litre of petrol and diesel is Rs 19.48 and Rs 15.33 respectively. Meanwhile, the VAT rate varies from state to state, with Mumbai imposing the highest – 39.12 per cent, whereas, Andaman & Nicobar charging the lowest at 6 per cent.

Experts have pointed out that the ad valorem nature of GST could further accelerate the fuel cost in case of crude oil facing an upward trend.

Source: PTI
Bringing auto fuel under GST could bring down prices by as much as Rs 29

Bringing auto fuel under GST could bring down prices by as much as Rs 29

Comments 2 comments

Bringing petrol and diesel under the ambit of the Goods and Services Tax (GST) could reduce the prices of the two petroleum products by around Rs 29 in Mumbai, experts suggest, according to a report by The Times of India.petroleum-under-gst

The report cites experts and dealers as saying that if fuel is brought under the GST regime, at a rate of even 40 percent, the price of petrol will go down by Rs 29 while diesel could go down by Rs 14. Moneycontrol could not independently verify the report.

While the international crude prices have dropped, people in India are paying higher prices because of a progressive increase in taxes. While the Centre has increased excise duty by Rs 10 per litre, in Maharashtra, VAT and surcharge increased by Rs 6.97 per litre.

While its basic price for the oil companies fell by Rs 5.52 per litre in four years, people in Mumbai are paying a retail price of Rs 6.33 per litre more, the report claims.

Central excise duty on diesel has increased by Rs 11.77 per litre while VAT and surcharge has increased by Rs 1.84 per litre in the last four years.

Petroleum pricing expert and fuel dealer Kedar Chandak told the newspaper, “If the prime minister and states’ chief ministers decide to give up a certain amount of taxes to extend relief to consumers and transporters, they can replace the existing multi-layered transport fuel tax structure with GST.”

“It is all the more tempting for governments to do so because it is an easy way to fill state coffers,” a transport expert said, according to the report.

Petrol and diesel prices continue to soar and touched another peak on Friday. Petrol was hiked by 36 paise to Rs 85.65 per litre in Mumbai.

This is the 12th straight hike in a row. Diesel prices on the other hand, were hiked by 24 paise to Rs 73.20 per litre in Mumbai. Petrol prices in Delhi were increased by 36 paise to Rs 77.83 per litre and diesel by 22 paise to Rs 68.75 per litre.

Petrol prices have risen by Rs 11.02 while diesel has risen by Rs 7.27 in the past 12 days in Mumbai.

Petroleum Minister Dharmendra Pradhan had earlier said that the government will intervene to reduce prices while his colleague Nitin Gadkari said that subsidising petrol and diesel to bring down their retail prices will take money away from government’s social welfare schemes.

Source :  Money Control
States against govt plan to levy GST on petroleum products

States against govt plan to levy GST on petroleum products

Comments 0 Comment

petroleum-under-gst

States have refused the central government’s appeal to bring petroleum products under the ambit of Goods and Services Tax (GST) even as prices of petrol and diesel continue to skyrocket in contrast to global standards.

Taxes constitute more than 50% of the price consumers pay for petrol and diesel. States, which charge sales tax and VAT (applied on top of the central excise duty) are reluctant to move away from the present tax regime unless the Centre promises special annual grants, top government sources told Hindustan Times.

Sources in the Union finance ministry said talks with the oil ministry is currently on but it’s the GST Council, the highest decision-making body of the indirect tax regime, that will have the final word on the inclusion of petroleum products. The Council is chaired by Union finance minister Arun Jaitley with all of his state counterparts as its members.

Also read: Petrol Should be Brought Under GST, Reiterates Dharmendra Pradhan

“It has only been two months since the GST was introduced. We have to give time to the states to get over the teething problems before we start discussions on whether petroleum products should be brought under GST. This matter is unlikely to be taken up immediately,” said a senior official in the finance ministry, refusing to be identified.

For the states, moving to the GST for petroleum products could amount to a “loss” in revenue. While the Centre collects ?21.48 as excise duty, states charge value added tax (or VAT, which varies from state to state, ranging between 25% and 48%) along with 25p as pollution cess with a surcharge.

In 2016-17, the combined revenue collected from the petroleum sector was ?463,089 crore, according to figures available with the ministry of petroleum and natural gas. Of this, states’ share was ?189,587 crore.

Under GST, even if petrol and diesel are charged at the highest slab of 28%, states, which get a substantial chunk of their revenue from the sector, will stand to lose considering they will only get 14% of it — much lower than the present rate of VAT.

“Taking the autonomy of taxing petroleum products away from the states will hurt our exchequer. States have freedom to change the VAT on petrol and diesel. But under the GST, this flexibility will go,” said a senior official in the finance ministry of a non-BJP ruled state.

Other state finance ministers HT spoke to said they are ready for the change “only if state-specific grants are announced by the Centre” to make up for any revenue loss.

With highest VAT and the surcharge in the country, Maharashtra government earns over ?20,000 crore a year from taxes on petrol and diesel.

“Bringing petrol and diesel under GST regime will lead to the huge loss to the state exchequer. There is rising demand of doing away with the surcharge, but we recently raised it on three occasions to generate funds for drought mitigation measures. We accumulate more than ?3,000 core from the surcharge. I don’t think doing away with the surcharge and VAT is possible at this stage,” said an official from the finance department.

The Centre has been under pressure from the opposition as well as consumers for the steady surge in fuel prices.

The ire is mainly directed at the fact that global crude oil price has fallen from $106 per barrel in July 2014 to $26 in January 2016 — a fall of 75%. At present, the global price of crude oil is $62.75 per barrel.


GST Ready Invoicing Software – Generate GST Compliant Invoice

Source :  The Hindusthan Times
Petrol Should Be Brought Under GST, Council Appealing to States: Dharmendra Pradhan

Petrol Should Be Brought Under GST, Council Appealing to States: Dharmendra Pradhan

Comments 1 comment

Dharmendra Pradhan GST

Petroleum Minister Dharmendra Pradhan has reiterated that the Goods and Services Tax (GST) must cover all petroleum products. He said that the GST council is appealing to all states to come to a consensus with the Centre on bringing petrol under the purview of the uniform tax. He said that this will help with tax predictability. Meanwhile, petrol price remained same as the previous day on Monday, September 18. While it was Rs 70.51 per litre in Delhi, petrol cost Rs 79.62 per litre in Mumbai.

The proposal for bringing petrol under GST came as petrol and diesel prices rose by over Rs 7 per litre in the past two months. The prices have been constantly rising under dynamic pricing which came into effect on June 16. The prices are now on a three-year high.


Ease Your GST Filing & Invoice with XaTTaX GST Software

On Sunday, Dharmendra Pradhan said that the rise in prices of petrol was due to several factors. “You have to appreciate the changing scenario. Everyday there is a pinch and relief. Due to natural calamities in the coastal areas of the United States, 13 percent refining capacity has been reduced which impacts the international market and which is now pinching,” the minister said.

Reports say that if fuel is brought under GST, petrol price can come down to Rs 38 per litre from Rs 70 at 12 per cent GST. As of now, petrol prices also contain other elements like Centre-imposed excise duty, state-imposed VAT and dealer’s commission.

However, former oil minister S Jaipal Reddy has said that bringing fuel under GST is “desirable”, but not feasible as the states would oppose it, but the Centre can cut excise duty on them. “While putting it (petroleum products) in GST is advisable, desirable, it’s not a feasible proposition because state governments…Of the BJP also, will not agree,” the senior Congress leader told PTI in an interview.

 


GST Ready Invoicing Software – Generate GST Compliant Invoice

Source :  India.com