In a curious turn, taxes and duties seem to exceede the actual cost of production of petrol and diesel in the country.
New Delhi: After Oil Minister Dharmendra Pradhan recently said that GST Council should consider bringing the petroleum products in the ambit of GST, questions are being asked as to whether the government will accept the idea or not.
Market watchers are saying that if government goes ahead with Pradhan’s suggestion and include fuel prices under the ambit of GST, there will be a steep downfall in the prices.
However, in a curious turn, taxes and duties seem to exceed the actual cost of production of petrol and diesel in the country.
The retail price of a litre of petrol exceeds due to the levy of central and excise duties. Furthermore, by adding company margin and other costs, the price charged to a petrol pump dealer is the total cost of fuel is being fixed.
For example (as on September 19) the customer has to pay Rs 70.52 on a litre of petrol in the national capital. If we take out the excise duty per litre charged by the centre (Rs 21.48), 27 percent VAT charged by the state government (calculated to be Rs 14.96), dealers commission (Rs 3.24), the actual cost of petrol come to be 30.85 per litre.
What happens if petrol and diesel prices come under GST ambit?
Assuming that the government brings petrol prices under 12 percent GST bracket, then petrol price could come down to Rs 38.1 in Delhi while at 18 percent, petrol price will come down at 40.05 a litre. If the government pushes petrol to highest GST tax bracket of 28 percent, then it will cost Rs 43.44 per litre in the national capital.
Similarly, if government brings diesel prices under 12 percent GST bracket, then it will be sold at around Rs 31 in Delhi. At 18 percent GST, diesel will cost around Rs 33 while at 28 percent GST, it will cost around Rs 37.
The above calculations are based on current prices of petrol (hovering around Rs 70-71/litre) and diesel (58-59/litre).
Amidst comments and criticism by opposition parties of a sharp rise in oil prices after the daily rate revision mechanism was introduced by the government recently, Petroleum and Natural Gas Minister Dharmendra Pradhan has said that prices may come down by Diwali festival.
When asked about bringing oil under the Goods and Services Tax (GST), Pradhan said that he hoped that it might be brought under the GST. “It will extend enormous benefit to customers.”