Inclusion of Petroleum Products under GST: An Analysis of Revenue Impact to Central and State Governments

Abstract

The biggest indirect tax reform came in India with the introduction of Goods and Services Tax (GST) law. Though all goods and services (except alcoholic liquor for human consumption) are brought under the ambit of GST, the GST council is yet to recommend five petroleum products to bring under GST law. These products are crude petroleum, motor spirit/petrol, diesel, aviation turbine fuel and natural gas. Presently, these products generate huge revenue to both central and state government(s) for having tax autonomy to these products. Central government charges central excise and cess and state governments charge value added tax resulting tax on tax effect. This study analyses revenue impact if these products are brought in GST umbrella by computing revenue neutral rate for central and state government(s). The study concludes that bringing petroleum products under GST shall reduce the revenue by many folds to both central and state government(s).