Collecting more taxes than absolutely necessary is exploitation and unconstitutional. It is a depressing but true fact, that the fuel is yet not brought under the Goods and Services Tax (GST) despite the fact that as per the original ‘The One Hundred and Twenty Second Amendment Bill of the Constitution of India’ officially known as The Constitution (One Hundred and First Amendment) Act, 2016, introduced as the national Goods and Services Tax in India from 1 July 2017, fuel is part of GST.
The concept of GST was created in the year 2000 and it took almost 16 years to make it a reality. The main argument supporting the introduction of GST in India was that we have multiple taxes in India and the high prices are the result of levy of these multiple taxes and that too with the levy of tax on tax. It was promoted and argued by the Central Governments be it the UPA or the current NDA, that if we being GST in India then the inflation can be controlled easily and the sky-high prices will come down, especially the fuel prices. The surging prices of fuel have crushed the common people.
|Table 1. How Fuel is getting taxed and its price if it is part of GST|
|Action||Items||Present regime||GST Regime|
|Basic fuel Price||33.00 (app)||33.00 (app)|
|Add||Cost of operation/land/entry/freight etc @16% app||5.26||5.26|
|Add||Excise Duty @51+%||19.51||NIL|
|Add||Commission of Petrol Pump Dealers @6+%||3.46||2.29|
|Add||VAT (state to state) avg app @27%||16.53||NIL|
|Add||GST say 28%||NIL||11.35|
|Retail Price to consumer||77.76||51.91|
The above calculation has been made with the highest rate of GST(28%).
So in a nutshell, the basic thing to understand for a common man is that at present main two tax components are being levied i.e. Excise and VAT and if one goes under GST, only GST will be charged. The merger of all taxes was/ is the mantra of GST to control inflation of the country, as far as tax impacts are concerned. The other noticeable point is the dealer’s commission, which also fluctuates, is reduced under the GST regime. So there are two beneficiaries of the present pricing system i.e. Government of India and the Petrol Pump Dealers (Oil companies; as they are also running many petrol pumps known as COCO i.e. Company Owned Company Operated). So one can easily understand that in this system the trio i.e. Central Government, Oil Companies, and Petrol Pump Dealers are beneficiaries of high prices whereas the consumers are the losers and are suffering continuously. And if fuel comes under the GST regime then all the three will lose and the consumers will get relief. So as a whole the ‘trio’ is ruling and controlling this whole affair and are not asking for bringing fuel under the GST. Apart from direct cost, the indirect cost of freight/ transportation will also go down and that will bring the prices down. Imagine all items vegetables/ grocery etc having a higher component of freight, once the prices of fuel go down, freight will go down and this will bring down the prices.
Now, we need to understand how to bring petroleum products under Goods and Service Tax (GST). The whole process of bringing fuel under GST is convening of the GST Council meeting, which can be convened through an email notice to all the States/ Union Territories (UT). The Union Finance Minister is the chairman of the GST council, which is presently Mr. Arun Jaitley. In the meeting there needs to be unanimity or majority in support of the agenda i. e. bring fuel under the GST. Once that is done, a resolution is to be passed, which is normally kept ready in advance. So let the GST Chairman call and convene a meeting of the GST council, on this very important agenda in the larger public interest. And let the proceedings be live on TV, where people can watch, as to what is happening on the issue of their interest. Let anyone dare to oppose this and let the obstructers be exposed.
The time has come to stop the mulching of public through fuel tax policy. Hon’ble Prime Minister should come forward and issue the necessary instructions in this regard. The ruling NDA alliance can show how a simple meeting and resolution can bring much-needed relief in the country. The mounting of Non Performing assets (NPAs) versus deferring the date of bringing fuel under GST, seems to be a bad financial strategy. A common man certainly feels that perhaps by keeping the fuel out of GST, the Government is making up the losses of mounting NPAs. Further, no one can understand the cause of delay in bringing fuel under the GST. Except for the lone and logical voice of a Rajya Sabha M.P. Dr. Subramanian Swamy, a world-renowned economist, who has stated on a public platform that anything over Rs. 48 per liter for petrol is exploitation. The Revenue Authorities must understand that a nation cannot tax business because business doesn’t pay taxes, it collects taxes from the people and pays to the government, after using it for self-purposes. It is the people, who are taxed. The famous quote fully fits here i.e. “We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
1. The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.