In the post-budget interactive session on the Union Budget 2023-24, Finance Minister Nirmala Sitharaman hinted at bringing petroleum products under the ambit of GST (Goods and Services Tax). Sitharaman said that petrol and diesel could come within the purview of the new indirect tax system only after the state governments reach upon an agreement. Once states determine a tax rate, crude oil and select petroleum products are likely to be subsumed into GST. For now, petroleum crude, motor spirit (petrol), high-speed diesel, natural gas, and aviation turbine fuel have not been covered under GST, and the agreement of the GST council is needed to decide the timing of including the petroleum products in GST.
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Furthermore, Sitharaman added that the provision has already been created for petroleum products to be brought under the new tax system. Reportedly, she said that her predecessor - Arun Jaitley - had already made the window kept open.
Presently, petroleum products attract VAT (Value Added Tax), Central Sales Tax, and Central Excise Duty. Depending upon VAT, local taxes, and freight charges, the prices of petroleum products vary state-wise. And if the GST council opts to bring fuel prices under its ambit, then the different rates of excise and VAT levied will be replaced by a uniform GST rate pan-India.
Under GST, we have 4 tax slabs of 5, 12, 18, and 28 percent. If the fuel prices start being fitted under GST, excise duty and VAT will likely be discontinued, and the petroleum products will expectedly attract a maximum tax of 28 percent on the base price. This, in turn, helps to bring down the running costs of the vehicles.
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That being said, the 49th meeting of the GST council is scheduled to happen on February 18 in New Delhi, post the presentation of the Budget. It will be chaired by the Finance Minister.
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