GST Council unlikely to bite the bullet on fuels – Today’s Paper – The Hindu BusinessLine

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Officials say Centre, States facing revenue shortfall due to lockdowns, lower demand

The GST Council, which is meeting on May 28, is unlikely to consider bringing petrol and diesel under the Goods and Services Tax, as both the Centre and the States are facing revenue crunch due to local lockdowns and lower consumption demand. However, there are strong chances of bringing natural gas under GST.

Officials from the Centre and States admitted that this is not the right time to think about this issue, for, though the situation may not be like the 2020 lockdown, economic activity had slowed down.

Movement of goods down

The latest e-way bill data show movement of goods has slowed and is likely to impact GST collections by up to 30 per cent. At the same time, restricted movement due to local lockdowns has started impacting consumption of petrol and diesel that in turn will hit tax collection not just for the Centre but also for States.

According to data from the Controller General of Accounts (CGA), the Centre earned over Rs. 3.14-lakh crore during April-February FY21 through Central Excise Duty, which mainly comes from petrol and diesel.

Now, with local lockdowns restricting movement, petrol consumption had slipped to 23.84 lakh tonnes in April from 27.40 lakh tonnes in March. This is the lowest in the last eight months. Similarly, consumption of diesel dropped to 66.79 lakh tonnes in April from 72.24 lakh tonnes in March, the lowest in the last three months.

Data from the Petroleum Planning and Analysis Cell show that States and UTs earned Rs. 1.35-lakh crore from POL (petroleum-oil-lubricants) products during April-December FY21 against around Rs. 2-lakh crore in fiscal 2019-20.

High taxation

After a surge in prices earlier this year, there has been a persisitent demand to bring petrol and diesel under GST as the high taxation (by both the Centre and States) make them costlier. For example, in Delhi, on the base price of Rs. 34.19 for a litre of petrol, the Centre levies Rs. 32.90 as excise duty including cess while State government charges Rs. 21.36 as VAT. Similarly, on diesel, on the base price of Rs. 36.32, the Central levy is Rs. 31.80 and the the Delhi State’s Rs. 12.19 for every litre.

In March, during the debate on the Finance Bill in the Lok Sabha, Finance Minister Nirmala Sitharaman had indicated the Centre’s willingness for a discussion on inclusion of petrol and diesel in GST if States bring it up at the GST Council meeting. It may be noted that there is no Constitutional debarment on inclusion of petrol/diesel.

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