The GST Council on September 17 (Friday) to consider taxing petrol, diesel and other petroleum products under the single national GST regime, a move that may require huge compromises by both central and state governments on the revenues they collect from taxing these products.
The Council, which consists of central and state finance ministers, in its meeting scheduled in Lucknow on Friday, is also likely to consider extending the time for duty relief on COVID-19 essentials, according to privy with the development. GST is being thought to be a solution for the problem of near-record high petrol and diesel rates in the country, as it would end the cascading effect of tax on tax.
The sources said bringing petrol and diesel within GST would be placed before the Council for discussion in the light of the court asking the Council to do so. When a national GST subsumed central taxes such as excise duty and state levies like VAT on July 1, 2017, five petroleum goods - petrol, diesel, ATF, natural gas and crude oil - were kept out of its purview for the time being. This is because both central and state government finances relied heavily on taxes on these products.
Since GST is a consumption-based tax, bringing petro products under the regime would have mean states where these products are sold get the revenue and not ones that currently derive the most benefit out of them because of they being the production centre. Simply put, Uttar Pradesh and Bihar with their huge population and a resultant high consumption would get more revenues at the cost of states like Gujarat.