Post-GST: The Future of Petrol and Diesel Prices in India
The implementation of the Goods and Services Tax (GST) in India has brought a whirlwind of change to the taxation system. However, one area that continues to be heavily debated is the pricing of essential commodities such as petrol and diesel. This article explores the current scenario and analyzes what one might expect post-GST for petrol and diesel prices.
Current Taxation Scenario
Before delving into the future, it is essential to understand the current taxation structure. Currently, petrol and diesel are not subject to GST. Instead, they are taxed under the Value Added Tax (VAT) system, with different rates applicable in various states. For instance:
The VAT tax rate on petrol is 29%, with a cess of Rs. 1 per litre. The VAT tax rate on diesel is 19%, with a cess of Rs. 1 per litre.In addition to these, there is an additional VAT of Rs. 3.50 per litre for petrol and Rs. 1.50 per litre for diesel. Therefore, the total tax burden on these fuels is quite significant.
Impact of GST on Petrol and Diesel Prices
With the introduction of GST, one might expect a simplification in the taxation structure. However, reality is a bit more complex. Any price reduction that might be achieved through the implementation of GST is likely to be temporary. Over time, the original price levels before GST are likely to be reinstated as the Oil Marketing Companies (OMCs) adjust their prices on a daily basis.
Though some reduction is anticipated, the extent of this reduction may be limited. According to the highest GST slab rate of 28%, the prices may eventually converge. However, this can be subject to further taxes such as compensation cess, which is expected to be between 20 to 30%. This additional cess, effectively packaged as an oil cess, will further contribute to the current prices.
Future Trends and Expectations
Considering the current scenario, it is highly likely that diesel and petrol will be placed under the 28% GST slab. Additionally, states and Union Territories will claim compensation for any shortfall in revenues due to the implementation of GST. This compensation cess, between 20 to 30%, is expected to offset this revenue loss.
If the prices of crude oil remain stable, we might expect a reduction of around Rs. 7 to 10 per litre in the prices of petrol and diesel. However, any shortfall in revenues may be corrected through the imposition of additional surcharges.
It is important to note that a revenue-neutral rate is expected to be established. Any shortfalls in revenue collection from GST could be made up through various surcharges or other tax measures. This means that the government aims to maintain the same overall revenue levels, which translates to higher prices for consumers in the long run.
Overall, while the introduction of GST may bring some initial changes in the taxation of petrol and diesel, the ultimate price levels are likely to reflect the current high tax structures, potentially with a few adjustments due to the additional cess and surcharges.
Conclusion
The post-GST future of petrol and diesel prices in India is a subject of much speculation. While there is hope for some reduction in prices, the reality may be more complicated. The government's approach to managing this transition, including the introduction of additional cess and surcharges, will play a crucial role.
For a more detailed analysis, continue reading and understand the complexities involved in this transformation.