WHY GST IS NOT APPLICABLE ON PETROL

Heading 1: GST – An Overview

Introduced on July 1, 2017, the Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services. It is a destination-based tax, which means it is levied at the point of consumption. GST has subsumed various indirect taxes such as excise duty, service tax, value-added tax (VAT), central sales tax (CST), and octroi. It is expected to bring about uniformity in the indirect tax regime of the country.

Heading 2: GST on Petroleum Products

Petroleum products, including petrol and diesel, are currently not subject to GST. This is because they are covered under the GST Negative List, which includes goods and services that are exempt from GST. The negative list is specified in Schedule III of the GST Act.

Heading 3: Why is GST Not Applicable on Petrol?

There are several reasons why GST is not applicable on petrol:

• Petroleum products are essential commodities: Petrol and diesel are considered essential commodities, as they are used by a large number of people for various purposes, including transportation, agriculture, and industrial activities. Levying GST on these products would increase their prices, thereby putting a burden on the common man.
• GST is a destination-based tax: GST is levied at the point of consumption. In the case of petroleum products, the point of consumption is often difficult to determine, as these products are often transported across state borders. This would make it administratively challenging to levy GST on petroleum products.
• Political considerations: Petroleum products are politically sensitive, and any increase in their prices can lead to public protests. The government may be reluctant to levy GST on petroleum products due to these political considerations.

Heading 4: Impact of GST on Petrol Prices

Despite not being subject to GST, the prices of petrol and diesel have increased significantly in recent years. This is due to various factors, including rising crude oil prices, excise duty hikes, and state taxes.

Heading 5: Way Forward

The government has been considering levying GST on petroleum products. However, there are concerns that this would lead to an increase in their prices. The government is likely to take a decision on this matter after considering all the pros and cons.

Conclusion

GST is a comprehensive indirect tax that has replaced various other indirect taxes. However, GST is not applicable on petroleum products, including petrol and diesel. This is because of several reasons, including the essential nature of these products, the administrative challenges in levying GST on them, and political considerations. The government has been considering levying GST on petroleum products, but a decision is yet to be taken.

Frequently Asked Questions

1. Why is GST not applicable on petrol?

GST is not applicable on petrol because petroleum products are considered essential commodities, the point of consumption is often difficult to determine, and there are political considerations.

2. What is the GST Negative List?

The GST Negative List is a list of goods and services that are exempt from GST. Petroleum products are included in the Negative List.

3. Is the government considering levying GST on petroleum products?

Yes, the government has been considering levying GST on petroleum products. However, a decision is yet to be taken.

4. What would be the impact of GST on petrol prices?

Levying GST on petrol would likely lead to an increase in its prices. However, the extent of the increase would depend on various factors, including the GST rate and the prevailing crude oil prices.

5. What are the alternatives to GST on petroleum products?

The government could consider other options to raise revenue from petroleum products, such as increasing excise duty or levying a cess.