Why GST is Not Included with Petroleum? TAX ON PETROL in Detail
Petrol in GST: Petroleum is the single item that yields maximum revenue. Understandably the states are reluctant to give up their powers to decide the rates of tax on its sale and wish to keep the entire revenue from taxing its sale.
GST on Petrol: Commodities / petroleum products account for a large part of the turnover of the central excise duties. Say between 40 and 50%. If they are brought under GST, they come under the credit chain. If credit is allowed, it will be big loss for the center.
The states also earn a significant part of their income from commodities. They want to protect such income by maintaining their ability to increase (or reduce) the tax rate. If it is brought into the GST, states would lose such power.
The use of gasoline / diesel is insensitive to the prices. If price-lowering people no longer use when the price expires, people will spend less. It has become the basic necessity. Thus, the govt can easily raise great treasures and still be sure that taxes are coming to their kitty.
So for crude / petroleum products in parallel with the GST regime, old tax laws will continue.
To Understand this we should Understand how the price of petroleum products are Calculated.
we can see Image to Understand Tax…
Total Tax = State VAT (13.92) + Central Excise Duty (21.48) = 35.4
Price of Petrol with out considering TAX = 65.48 – 35.4 = 30.08
That is, Tax levied is more that actual cost..
Lets calculate the tax percentage ,
(35.4/30.08) *100 = 117.68%
TAX ON PETROL IS 117.68 % (will change depending on State)
So how to include Petrol in GST where Govt says that the tax will be levied on four slab rates viz 5%, 12%, 18%, 28%.
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