Petrol and Diesel Taxation under the New GST Regime in India

With the introduction of the Goods and Services Tax (GST) in India, the taxation of petrol and diesel under the previous VAT and central excise duty regime has undergone significant changes. This article will provide a detailed breakdown of how petrol and diesel are currently taxed and the impending changes under the new GST regime.

Current Taxation of Petrol and Diesel

As of now, petrol and diesel in India are not taxed under the GST. These fuels are subject to VAT in addition to central excise duty. Historically, VAT on petrol and diesel has been 29% and 19% respectively, with an additional state VAT included. In addition to the VAT, a central cess of ?1 per litre is applied to both petrol and diesel. Moreover, there is a further VAT of ?3.5 per litre on petrol and ?1.5 per litre on diesel.

Exemption from GST

Currently, there is no GST applicable on petrol and diesel in India. Instead, these fuels are subject to central excise duty under the Central Excise Act 1944. Furthermore, they are also taxed under state VAT laws, which vary by state in India. The current regime under which petrol and diesel are taxed has been in place for many years, providing a stable but somewhat fragmented approach to taxation.

Impending Changes with GST

Despite the current exemptions from GST, it is clear that petrol and diesel will be brought under the purview of GST in the near future. The GST Council, which is India's central body responsible for making decisions on GST policy, has announced that petrol and diesel will be taxed under GST starting from a date to be notified. However, the exact date and specific rates have not yet been finalized.

Impact on Consumers

The move to introduce GST on petrol and diesel is anticipated to impact consumers in several ways. Firstly, the integration of all GST components into a single levy could simplify the tax structure and potentially lead to a more straightforward calculation of the final price. Secondly, the GST Council is likely to review and adjust the tax rates to ensure that the overall tax burden on consumers is reasonable and in line with overall market conditions.

Conclusion

The taxation of petrol and diesel in India has long been a subject of discussion and debate. With the impending move towards GST, the landscape of fuel taxation is set to change significantly. While the exact details are still being determined, it is clear that the new regime will aim to simplify and standardize the taxation process, ultimately benefiting consumers and the overall economy.

For accurate and up-to-date information on the taxation of petrol and diesel in India, please refer to the official GST website or consult with a professional tax advisor.