Fuel Cruelled in India : When will the Misery End?

The study tries to find out the reason for high fuel price in India and its prospective solution to ease the burden of huge fuel price from the shoulder of citizens of India. GST is being thought to be a solution for the problem of record high petrol and diesel rates India, as it would end the cascading effect of tax on tax. Ultimately, the article recommends rationalization and consideration of this sensitive issue from the part of India government as well as from its different state governments and urging a concerted effort on the part of government so that the principle of 'one nation, one tax and one price' may become a symbol of veracity. DOI: 10.7176/JETP/11-6-01 Publication date: November 3

If we can conduct similar calculation for diesel, the price of diesel in Delhi at that time was Rs 88.62 per liter [Rs 41.50 for dealers by charged by oil marketing companies + Rs 31.80 for excise duty for central government + Rs 2.59 per liter for dealer commission + Rs 12.73 per liter for state government VAT at the rate of 16.75 percentage]; Therefore, the total tax collected amounting Rs 44.53 per liter of diesel by both state and central government on price charged from dealers in Delhi is about 107 per cent.

4.Potential effect on price of fuel if goods and service tax is imposed:
Now, if fuel prices are brought under GST, 28 per cent tax will be levied on them as it is the highest slab of tax duty. None of these rates are now close to the actual tax rate on petrol and diesel charged by both central and state governments under prevailing situation. A true snapshot can be cited; Let us consider that on September 15, 2021, the price of petrol in Delhi was Rs 40.55 per liter of petrol(base price&freight cost). Now, the same dealer commission of Rs 3.82 per liter is to be added with. Before GST, the price of petrol bang will be Rs 44.37 per liter. Charging the maximum GST rate of 28 per cent on this petrol price bang will result in tax revenue of Rs 12.42 per liter, resulting in an affordable consumer price of Rs 56.79 per liter. Thus, if fuel is brought under GST, the consumer will save Rs 44.40 in Delhi at the then prevailing retail price and at the same time, the government will lose the same amount of tax revenue. The same example applies to other states, but at different rates.
By Charging excise duty and state VAT, Central and state taxes on petroleum products contributed over Rs 5.55 lakh crore in 2019-20, and diesel and petrol are the two biggest revenue earners in that order. The petroleum sector contributed Rs 3,71,726 crore central excise revenue in 2020-21, and state levies on value-added tax (VAT)of Rs 2,02,937 crore.
Tax experts believe that bringing petro products under GST will be a tough call for both the Centre and states as both will stand to lose. The Centre will also lose as the majority of the Rs 32.90 per litre excise duty on petrol and Rs 31.80 on diesel is made up of cesses, which it does not share with the states. Under GST, all revenues will be split 50:50 between the Centre and the states.

Conclusion:
In order to bring petrol and diesel under GST and to maintain same amount of revenue from fuel taxes, the rate of GST has to be very high, even more than 100 per cent to uphold equivalent amount of tax revenue that government is earning at present. Only then will the central and state governments be able to maintain this equivalent amount of revenue they are currently generating. Although the current various taxes on petrol and diesel are more than 100 per cent of the total as presented above, the current tax system is not so transparent and straightforward. Therefore, most people fail to understand that they are paying high taxes. Of course, if prices of fuel come under GST, GST authority will take more transparent tax measures. The problem is whether the government will want to come up with an indirect tax with 28 percent tax rate , which would be tantamount to economic suicide of governments. Thus, we can assume that only when the government's reliance on taxes on fuel is reduced, then it will be possible to bring petrol and diesel under GST, and for that to happen, economic growth will have to return to its own rhythm which may not be possible without long-term waiting. In fact, only then the entire nation as well as the consumers of India will heave a sigh in relief.
Moreover, it is now golden time to ease the burden of fuel price hikes from the shoulder of common people because Brent crude oil price per barrel is gradually diminishing from USD 76.1 on 5 th July to USD 74.60on 15th September. Ultimately, we may be optimistic that by rationalizing and considering this sensitive issue, concerted effort should be there on the part of government so that the principle of 'one nation, one tax and one price' may become a symbol of veracity.