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| Fuel price under GST |
SBI economists have said that petrol prices can be brought down to Rs. 75 per liter from the existing Rs.100+ pricing, if brought under ambit of GST. Fuel prices impacts common man due to cost escalation in essential commodities.
Factors influencing fuel pricing mechanism
- · International crude oil price, import duty, refinery cost, freight cost, central excise duty, state value added tax (VAT), margin of oil marketing companies (OMCs) and of retail fuel outlets are all added up on to the final fuel price of the consumer.
- · Combination of high taxes and reduced oil supply by oil producing countries have led to increase in fuel prices.
- o OPEC+ have decided to undertake output cuts of 1M barrel of oil production.
- · Being an oil-dependent country, India imports 84% of crude oil – which undergoes price changes due to exchange rates also.
- o If the Indian rupee depreciates, imports become costlier – which in turn increases the price of crude oil, despite the international prices declining.
- · Added to this, crude supply to Asian countries have additional charge in the form of Asian Premium, levied by oil exporting countries. Regulation of prices in India & GST
- · Both petrol and diesel prices were deregulated with the phasing out of administered price mechanism – Government has no role in daily price fluctuations.
- · However, as petrol and diesel are out of GST net, taxes are levied by both Central and State Governments in the form of specific tax and ad-valorem tax respectively.
- · Hence, brining petrol and diesel under GST could lead to fall in prices – as even the 28% tax slab (maximum) of GST will prove to be beneficial for consumers.
- · As per SBI economist, currently, 60% of petrol price and 54% of diesel price comprises of Central and State taxes.
Tags:
Economy
