Petrol Hikes & The role of GST behind the screen.

        In recent days, from the digital media platforms or from the newspapers or by experiencing personally, we are coming across the hikes at the prices of petrol & diesel. So here in this article, you will get to know;
How prices have increased, the reason behind it, and
What is the interrelation between GST and petrol hikes?

ISSUE of PETROL & DIESEL HIKES:-

Indian Government Imports around 80% crude oil from Arab countries like Oman, Dubai, etc.
When we import oil from other countries, the basic price of petrol we will get around 30₹. But this is not the actual price we are paying in our day to day life... Why?. Here Indirect tax plays a major role behind the petrol hikes. This petrol, when it reaches the consumer it has been imposed by 2 taxes which comes under the roof of INDIRECT TAXATION.
1. CENTRAL GOVT IMPOSED TAX  (Excise tax)
2. STATE GOVT IMPOSED TAX  (VAT )
Therefore the basic price of petrol after importing will be of 30₹/litre.
But when it comes to the Central government it imposes around 106%of tax on the basic price which will be an extra 34₹ (up to now the overall price becomes 64₹/litre). After that when it comes to state government it imposes around 60%of tax on the basic price and which will be an extra19₹ (here finally the price of petrol becomes 83₹/litre when it reaches the customers).
           Here the main picture comes into play i.e Even though the central government imposes the tax of 104% but in that around 43%of collected tax will be given to the State for its smooth running.

Having a glance at the above :
Central tax(30₹/ltr+extra 106%tax is 34₹)+State tax(extra 60%of tax on base price 30₹ is 19₹)= Finally 83₹/ltr for consumers.

         Even in this pandemic situation both the governments are in a harsh way of improving revenue by increasing taxes which leads to cascading effect(tax on tax). But this is not the correct time.

And one of the reasons for hikes is also due to the downfall of Indian rupee when compared to the dollar which is a negotiable factor of India in international trade & also the raise of crude oil rates from importing countries in this pandemic situation also plays a role and some countries which export oils to other countries stopped temporarily for their own usage.

The main point is that petrol is not included in GST. Here the contradiction arises that why petrol is not included in Gst. Why the central & states are not in the way to propose this fact in the Gst council. This hike in petrol prices opposes the principles of tax which is said by Father of Economy Adam Smith: "CANON OF EQUALITY."

GST- UNIFIED INDIRECT TAXATION:-
     Ok, moving furtherly into the topic, now let us have a basic understanding of GST.
Every Indian citizen plays a crucial role in the smooth running of government revenue behind the screen by paying tax either knowingly/unknowingly from purchasing day to day products.
Generally, we pay tax in 2 ways i.e
              1. DIRECT TAX:  Ex: Income tax or property tax.
              2. INDIRECT TAX: Which plays a most prominent role in the taxation system that every individual is unaware.
              Some of the major examples of indirect taxes that levied by the Central Government as well as State Government are: Sales tax, Service tax, Custom duty( tax on imports/exports of goods), Excise duty( tax imposed on goods that have been manufactured within the country)VAT: VALUE ADDED TAX (the tax that is imposed on the consumption of products) by state govt.
           
             The main purpose of introducing GST taxation by the government is to overcome the following outbreaks i.e
           1. To avoid the flow of black money from cascading effect i.e (tax on tax)
           2. Multiple taxations
           3. Lower revenue
           4. Hampering growth
So, to avoid all these negative effects and for the development of the nation, the government used a weapon called UNIFIED TAXATION SYSTEM and popularly known as GST - "ONE NATION ONE TAX". The GST council has divided the tax into 4 slabs i.e 5%, 12%, 18% and 28%.

IS IT POSSIBLE TO INCLUDE PETROL UNDER GST?
Petrol & diesel has an exemption to GST that's the reason why these petrol hikes are not into the thoughts of a middle-class citizen. It is quite interesting to know that if petrol & diesel comes under GST the prices will decrease automatically because there will be no cascading effect.
Have a look into the below info:
          GST%        ₹PETROL RATE     
           12%.               44₹
           18%.               47₹
           28%.               52₹
     This clearly says that even if we consider petrol as a luxury good and apply a GST of the higher slab i.e 28%, the price of petrol becomes 52₹ which is 30₹  less than the current price. Same with diesel.
And if the cost of petrol & diesel decreases it improves the transportation facility and which leads to a decrease in tax on goods, which is good for every citizen. But the govt is neglecting this issue because it will lose the main source of revenue from tax i.e, from Excise tax Central govt gets 3 LAKHS CRORES  & State govt gets 2 LAKH CRORES through VAT.

Here the question arises that, is it possible to bring petrol under GST?....... Yes.

This is important to understand the decision of bringing Petrol&diesel under GST which will be made by GST COUNCIL which is lead by Union Finance minister & also it consists of finance ministers from every state. They will collectively make a decision on GST. And this is up to every state's decision whether to put petrol under GST or not. For getting approval it needs 50% of votes. Where 1/3rd of votes belongs to Central govt and 2/3rd of vote belongs to each State. But right now, the states are opposing this issue as they will lose their revenue from taxes in the form of VAT.
And Central govt is also opposing this issue because they lose their revenue in the form of Excise tax.

In a practical way other than the GST the petrol hikes goes down by decreasing any one of the Excise tax(Central Govt) & VAT tax (State Govt). But both the government are suffocating the people in the name of tax to increase their revenue.

The Disgusting truth is that we the citizens don't mind paying taxes. We will pay taxes but we never come to know it in a Real transparent manner where our money is flowing. And both governments are accountable to every citizen about where each penny is used. We the citizens should pay a role intellectually in the topic of tax apart from the political parties. Because political parties protect each other & defend each other for their sake.

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8 Comments

  1. Excellent , Good content, keep rocking.

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  2. seriously good information......
    explains current situation....... great work...

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  3. This comment has been removed by the author.

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  4. Kudos for the efforts you put on to collate such an informative content..keep up the good work..my best wishes!!

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  5. Nice Information. Very well explained. I never expected this.

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