Dinesh Kamath's Editorial 'Bring petrol and diesel prices under GST' that was published in Newsband

Bring petrol and diesel prices under GST

The pricing policy for petrol and diesel should be brought under GST at the earliest. The oil companies still follow policies dating back to the controlled pricing era which ended during the UPA II regime in the case of petrol and in the first year of the current government for diesel. Petrol and diesel are not imported but refined within the country. The prices of petrol, diesel and indeed all fuels refined from crude oil should be linked to the cost of crude plus refining and transportation costs and margins.

The basic price (excluding taxes) of fuel is the same across the country. It is time the Centre get oil companies to review their pricing strategies reach an agreement on the inclusion of petrol, diesel and ATF under the GST umbrella. Inclusion of these fuels will help large sections of industry. The oil companies will also stand to benefit.

When UPA was in power in the Centre for ten years, Central government did not implement a policy for taxation and pricing of petroleum goods like petrol, diesel, LPG etc. Opposition parties like BJP did not also demand implementation of such a policy. When the States are ruled by a party other than the ruling party the State governments are the biggest beneficiary of price increase as their tax revenue increases too. Therefore, implementation of a long term and sensible policy for pricing and taxation of all petroleum goods at the Central and State government level is necessary.

The need for bringing the petrol and diesel under GST is with some rationale. Since it is lower than the exorbitant rate of VAT, the prices of the twin fuels may get reduced but there must be a concern on the Cess on the products over and above the GST. It will reduce the GST benefit further. Nevertheless oil companies’ role in streamlining the prices of petrol and diesel is a must.

Oil Minister Dharmendra Pradhan said he has requested the Ministry of Finance to bring petroleum products under the ambit of Goods and Services Tax (GST) in the interest of consumers. Justifying the move, he said there has to be a “uniform tax mechanism” all over the country. He have appealed to all the states and finance ministry to bring petroleum items under GST after looking into the consumer interest.

Domestic rates are determined by international prices. There is no communication gap or mismatch (between domestic and global prices). Whatever is the international price is passed exactly to the Indian consumer. When it is increasing, we have to increase, when it is declining we have to decrease it. That is the practice in the country.

In our country the State governments are heavily dependent on tax revenue from petroleum goods like petrol diesel, & LPG. With every increase in prices of these goods, the State governments’ tax revenue has always gone up over the last forty years or so. Hence all State governments were reluctant to allow the Central government to levy Central GST on petroleum goods.

Agreeing with the proposal of Pradhan to bring petroleum products under GST, it is suggested that all indirect taxes (electricity duty, stamp duty and so on) may be brought under GST.

However, the learned Petroleum Minister's demand to bring petroleum products under GST sounds funny as his government had already implemented GST and declared ONE NATION ONE TAX. What was he doing all these days before the roll out of the GST?