GST and State Tax on Petrol, Diesel Prices: Soon, you may need to pay more

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The total tax on petrol comes to 45-50 per cent and 35-40 per cent on diesel.
The total tax on petrol comes to 45-50 per cent and 35-40 per cent on diesel.

New Delhi : The rising petrol, diesel price is likely to add few more rupees in the name of GST and State Tax. A tax rate of 28 % including plus states local sales tax or VAT on fuel is likely to take a shape when the two auto fuels are covered under the GST regime, a top government official said.


The GST rate along with VAT will be equal to the present tax rate, which include excise duty, levied by the central government, and VAT charged by the states.

But before the GST approval on fuels, the Centre has to make a decision if it is willing to let go of the about Rs 20,000 crore of input tax credit it presently holds by keeping petrol, diesel, natural gas, jet fuel and crude oil out of the Goods and Services Tax (GST) regime that came into force from July 1, 2017, the official said.

"There is no pure GST on petrol and diesel anywhere in the world and so in India too it will have to be a combination of GST and VAT," said the official, who is associated with the GST operation.

“The timing of including petro products in GST will be a political call which centre and states have to take collectively,” he said.

Currently, the Centre levies a total of Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel. In addition, states levy Value Added Tax (VAT), the lowest being in Andaman and Nicobar Islands where a 6 per cent sales tax is charged on both the fuel. Mumbai has the highest VAT of 39.12 per cent on petrol while Telangana levies highest VAT of 26 per cent on diesel. Delhi charges a VAT of 27 per cent on petrol and 17.24 per cent on diesel.

The total tax on petrol comes to 45-50 per cent and 35-40 per cent on diesel.

The official said that under GST the total occurrence of taxation on a particular good or a service has been kept at the same level as the sum total of central and state levies existing pre-July 1, 2017. This was done by fitting them into one of the four GST tax slabs of 5, 12, 18 and 28 per cent.

Coming to petrol and diesel, the present taxation is already at peak level and if the tax rate was to be kept at just 28 per cent it would result in a big loss of revenue to both centre and states, he said.

"The Centre doesn't have the money to compensate states for loss of revenue and so the solution is to have a peak rate of tax plus allowing states to levy some amount of VAT keeping in mind that the overall incidence should not exceed the present levels," he said.

Experts believe GST as the solution to high fuel prices but the structure in works would ensure rates remain almost at same levels unless centre and states decide to levy pure GST of 28 per cent and not go for an additional VAT or a cess.

After hitting all-time high of Rs 78.43 a litre for petrol and Rs 69.31 for diesel on May 29, rates have slightly fallen during the succeeding days following the international oil prices and rupee strengthening against the US dollar. Petrol costs Rs 76.27 a litre and diesel Rs 67.78 in Delhi.

Union Minister Arun Jaitley in a blog post on Monday mentioned to states earning more through ad valorem VAT when oil prices rise. The central excise is a permanent levy and is not subjected to change with changes in prices.

"The States charge ad valorem taxes on oil. If oil prices go up, States earn more," he had written.