Petrol and diesel are currently excluded from GST due to the complex nature of fuel pricing and the significant revenue these fuels generate for both the central and state governments. The taxes on these fuels include Central Excise Duty and State VAT, which can lead to varied prices across different states. This exclusion allows states to maintain control over their tax revenues, but it also creates confusion and inconsistencies for consumers. The ongoing discussions about bringing these fuels under GST aim to streamline pricing and enhance transparency, but consensus among state governments is crucial for any implementation.

Currently, the pricing of petrol and diesel in India is affected by multiple layers of taxation. On average, Central Excise Duty on petrol can be as high as ₹19.90 per litre, while State VAT can vary significantly from state to state, sometimes reaching up to 50% of the retail price. This layered tax structure leads to considerable price differences across states. For instance, while the base fuel cost might remain consistent, the final retail price can vary dramatically depending on the state’s tax rates, causing confusion for consumers and complicating the fuel market.

Incorporating petrol and diesel under GST could yield several benefits, primarily by streamlining the tax structure. Proponents argue that it would create a uniform pricing mechanism across states, thus eliminating the disparities caused by varying state VAT rates. This could potentially reduce the overall tax burden on consumers, as the maximum GST rate for these fuels is theoretically capped at 28%. A simplified tax structure could lead to lower retail prices, making fuel more affordable for consumers and providing clearer pricing mechanisms, which would be a significant improvement over the current situation.

If petrol and diesel were brought under GST, the retail price could potentially decrease significantly. For example, under the current pricing structure, the total price of petrol can reach around ₹96.86 per litre due to high excise duties and VAT. However, if GST were applied at a rate of 28%, the new price could hypothetically drop to around ₹78.36 per litre. This projected price breakdown highlights how GST could reduce the cumulative tax burden on consumers, making fuel more affordable. However, actual implementation would depend on negotiations with state governments regarding additional taxes such as VAT.

One of the primary challenges the government faces in implementing GST for petrol and diesel is achieving consensus among state governments. Each state has its own tax regime and revenue needs, and many states rely heavily on the revenue generated from fuel taxes. This creates resistance to a uniform GST, as states fear losing revenue. Additionally, the political implications of changing fuel prices, which can affect consumer sentiment, add another layer of complexity. The government must navigate these challenges while making a compelling case for how GST could benefit consumers and lead to a more transparent pricing system.

Yes, several other petroleum products are already taxed under GST, providing a contrast to petrol and diesel. For instance, Liquefied Petroleum Gas (LPG) is taxed at a GST rate of 5%, while petroleum oils, excluding crude oil, are taxed at 18%. Natural gas also falls under the 18% GST rate. These existing rates show that while petrol and diesel are currently outside the GST framework, there are mechanisms in place for other petroleum products, which could serve as a reference point for future discussions about the inclusion of these fuels.

The government is actively engaging in discussions regarding the potential inclusion of petrol and diesel under GST. Strategies include clarifying the benefits of a uniform pricing structure and demonstrating how this could lead to reduced prices for consumers. The Finance Minister has indicated a willingness to explore this option, but it hinges on gaining agreement from state governments. Ongoing dialogues focus on addressing concerns about revenue loss for states and finding a balanced approach that benefits both consumers and state finances. The timeline for any implementation remains uncertain as negotiations continue.

Consumers can stay informed about potential changes to GST on petrol and diesel by regularly checking updates from the GST Council and the Ministry of Finance. Following reputable news sources that cover economic and taxation policies can also provide insights into ongoing discussions. Additionally, government announcements, press releases, and public consultations can be helpful. Engaging with consumer advocacy groups that monitor fuel pricing and taxation can also offer valuable perspectives and keep consumers aware of how such changes might impact their expenses.