😲 Now Pay GST on Petrol?
Niti Aayog wants you to pay GST on petrol now. But, the government is not happy. Why?
Changing the status quo wasn't easy. Convincing all the States to adopt GST wasn't easy.
Yet, it happened.
On 1 July 2017, approx. 17 different types of taxes were absorbed into GST and the dream of One Nation One Tax was brought to life. But, with an asterisk.
For petroleum products, the government said that the date of implementation of GST will be announced later. Well, the dates have not been announced till date.
But NITI Aayog has chalked a plan to swiftly move them under the GST regime.
What’s going on?
You see, taxes on petroleum products constitute 25-30% of tax revenue for States. Implementing GST in itself was going to be a very bold move. It could impact the earnings for a State. How could they put their entire collection of revenue in uncertainty, right?
So they wanted petroleum products to be taxed as is. The Centre was more than happy because they too benefit more from the old regime. How?
The Central Government imposes an excise duty and the State Governments levy Value Added Tax (VAT) and other charges on the sale of fuel. Out of the total taxes levied, 60% goes into the pocket of the Central Government and 40% goes in the pockets of State Government. But in GST, it will be equally split between the two.
While it is in best interest for both the Centre and State to not introduce GST for petroleum products, there has been a public uproar demanding GST.
Woah! The public wants to be taxed, But the government is reluctant. Why?
Around 60% of the total price that you pay on petrol or diesel is tax. On the other hand, even if the highest GST rate at 28% were applied, us consumers won’t have to shell out a fortune to buy petrol and diesel.
But at the same time, the revenue for both States and Centre will fall sharply. Which obviously, the government does not want.
Yet, they are forced to consider moving to the law because of the public outroar.
NITI Aayog hopes that the States can be convinced (given it is a bigger sacrifice for Centre) by luring them with a compensation package.
This solution is nothing new. While implementing GST for the very first time, States were offered compensation. Sounds a sweet deal for the States, right?
But they might not agree this time. Because with the onset of the pandemic, the central government went back on its promise of compensation citing “Act of God”.
Poor states. Left hanging and betrayed. Once bitten twice shy.
They don’t have any reason to trust the government again.
Looks like we really are in a fix.
Common man wants GST, but the Government does not. Solution?
In other countries, non-renewable sources of energy are levied to dual levies. Along with GST, they are also charged with some sort of sin taxes to discourage people from consuming them. In the EU, total tax on fuels ranges from 45%-60%.
Aah. Doesn’t that mean that the current tax regime is just fine?
So the Indian government is not really doing any wrong by taxing us so exorbitantly? It’s saving the environment, after all. Right?
Well, before walking down that path in India, the government needs to strengthen infrastructure for renewable sources of energy.
Electric vehicles have to become fairly common (even for commercial use). Only then can the government command the right to charge sin tax on these products. If we don’t have choices, how are such high rates justified?
Anyways, what do you think: will the governments agree to NITI Aayog’s plan?
Discuss with your friends on Twitter!