FM SAID COUNCIL ALSO DECIDED TO CORRECT LONGPENDING ISSUE OF INVERTED DUTY STRUCTURE SUFFERED BY FOOTWEAR AND TEXTILES SECTORS.

International oil rates, which are often volatile, directly influence pump prices of petrol and diesel in India. Central and state taxes also influence domestic auto fuel rates.

Through 2020, as global crude prices plunged (below $20 a barrel in April last year), the central government raised excise duty on fuel to shore up its finances. States too followed suit as their revenues were hit on account of the pandemic. As a result, central and state levies on petrol and diesel are over 50% of their retail prices.

According to official data, the petroleum sector contributed Rs 3,71,726 crore central excise revenue in 2020-21, and Rs 2,02,937 crore state levies or value-added tax (VAT).

Due to high incidence of taxes and a spike in international oil prices, petrol and diesel rates had soared to record Rs 101.84 per litre and Rs 89.87 respectively in the mid-July this year. While prices soften a bit in mid-August, a further spike in auto fuel rates is expected as international crude prices are again moving north and rupee is depreciating against dollar.

India imports more than 80% crude it processes and pays in dollar. At present, petrol is sold at Rs 101.19 per litre in Delhi and diesel at Rs 88.62. In Delhi, central levies account for over 32.5% of petrol’s price, and state taxes (VAT) 23.07%. On diesel, central excise is over 35.8% while VAT is more than 14.6%.

MS Mani, senior director at consulting firm Deloitte India said, “The multiple rate changes announced indicates that the GST Council is willing to alter rates in cases where the rates are leading to an inverted duty structure or where there are other valid reasons for changing the rates.”

“While food delivery services would constitute e-commerce services, sufficient safeguards need to be taken in subjecting them to GST to ensure that smaller food outlets are protected and consumers do not end up paying more,” he said.

Santosh Dalvi, partner and deputy head of indirect tax at KPMG India said, “Amidst revenue concerns expressed by states, the decision to defer inclusion of petroleum products within the ambit of GST will affect petroleum industry and consumers with continual cascading of taxes.”

“The big decision to extend the period of GST Compensation Cess till March 2026 in order to service borrowed principal and interest will affect sectors suffering from such cess which expected relief after five years,” he said.

Commenting on the decision not to bring petrol and diesel under GST, Professor Yashvir Tyagi, former head of the department of economics at Lucknow University, said, “The people at large will be disappointed to know that the GST Council did not agree to bring the petroleum products under the GST regime which would have brought down the prices of petroleum products substantially. This would have given the much needed relief to the common man.”