Bringing petrol and diesel under the goods and services tax (GST) regime will only have a minor impact on their prices as states will levy additional taxes to prop up revenues, Bihar Deputy Chief Minister Sushil Kumar Modi said. He also said that pruning of list of items under the highest tax slab of 28 per cent first requires stabilisation of revenue over Rs 1 lakh crore a month as the items have a high revenue implication. Without specifying any timeline, he added, both decisions will be taken by the GST Council. “Most of the people feel that if we put petroleum products under GST then 28 per cent highest slab will be levied and prices will come down. It will affect the prices only in a minor way,” Modi said. He further said the trend worldwide is that if petrol and diesel are included in GST then states let additional taxes “over and above to prop up revenue”. “If they (states) forego, how will they earn revenue,” he said. For reducing the items in 28 per cent slab, Modi said, “We reduced rates on 200 items, we are sensitive about it. Going ahead the GST Council (will decide), I alone won’t decide. But whether it’s cement or paint or other items in 28 per cent slab, the revenue implication is of about Rs 10-20,000 crore. Revenue needs to stabilise first. If we cross Rs 1 lakh crore revenue per month, then GST Council will find it more easy to prune the list of items under 28 per cent slab. Similarly, a three slab GST with a rate between 12 per cent and 18 per cent could also be possible only after the monthly revenue collections stabilise and such a decision will take time, he said. Modi said 45-50 per cent of tax revenues of states come from petrol and diesel. He said petrol, diesel would not be included in the GST in the coming few months and focus would now be on new return filing system. He said the new returns filing system will take 6-7 months to be finalised and that the government will reach out to stakeholders for their views on the new proposed system. The peak GST rate plus VAT will be equal to the present tax incidence, which is made up of excise duty, levied by the central government, and VAT charged by the states. The Centre currently levies a total of Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel. On top of this, states levy value added tax (VAT) on petrol and diesel. After hitting all-time high of Rs 78.43 a litre for petrol and Rs 69.31 for diesel on May 29, rates have fallen during the subsequent days on softening in international oil prices. The Central government had raised excise duty on petrol by Rs 11.77 a litre and that on diesel by 13.47 a litre nine times between November 2014 and January 2016 to shore up revenues as global oil prices fell, but then cut the excise duty just once in October last year by Rs 2 a litre.
