Karnataka petrol diesel price hike: Why keeping fuel out of GST is hurting the consumer

Karnataka: More than half of the amount you pay for every litre of petrol is actually not the cost of the fuel, but taxes! The government: both Centre and states imposes heavy taxes on petrol and diesel to keep the economy running – even at the cost of burning a larger hole in your pocket with every price hike. And this, despite you paying for the fuel after paying high income tax on your salary and GST on pretty much everything else.

Because it suits the government from a tax collection point of view, Petrol & Diesel have been kept outside of the ambit of GST.

Let’s look at what Karnataka has done over the weekend, and how – if there was GST on petrol, then the cost to you – the end consumer – could have come down drastically to under 70 rupees per litre of petrol.

Unbelievable, right? Yes, that what the government wants it to be. Unbelievable.

So, petrol prices have been raised in Karnataka on June 16th. Residents of the state are now expected to shell out an additional three rupees per litre, reaching almost 103 rupees per litre of petrol from under 100 rupees till last week.

KARNATAKA RAISES PETROL, DIESEL PRICES

 Karnataka has upped the sales tax on petrol from about 26% to nearly 30%!

KARNATAKA SALES TAX ON PETROL

This increase has come because the state wants to make more money off you to fund Congress’s government guarantees schemes in the state. The additional tax is likely to generate 2500-2800 crore rupees in tax revenue for the state.

Then the Centre has to take its own pound of flesh here… On every litre of petrol – the centre charges 19.90 rupees.

CENTRE EXCISE DUTY ON PETROL

So, what is the actual price of petrol?

India is an oil importing country. At the going rate of 82 – 83 dollars per barrel, the basic import price comes to approximately 43 – 44 rupees per litre. Oil Marketing Companies make approximately 5 rupees per litre and the petrol pumps charge around 3 rupees per litre. So, if you take into account the total cost break of up Petrol in Karnataka today, here is what you get. You end up paying almost 52 rupees in taxes out of ₹103 / litre of petrol in Karnataka.

BREAK UP OF PETROL PRICE

Karnataka Retail Price

The story is similar across all states, and while the Centre’s tax rate is fixed at ₹19.90 per litre, states can make arbitrary changes to their own tax rates to make more money as they please.

Now that moot point is – even seven years on – why are Petrol and Diesel not kept under GST?

For the consumer, the price advantage would be tremendous.

Take the same example… even with the highest 28% GST slab, split equally between the centre and states at 14% SGST and 14% CGST – theoretically, the cost of one litre of petrol can come down to well under ₹70 per litre.

THEORETICAL COST OF PETROL WITH 28% GST

Even as the 53rd GST Council Meeting is slated for next week, it is highly unlikely that any state or even the Centre for that matter would want to let go of such a lucrative source of tax revenue – so a real reform in GST through its application on petrol and diesel is just a pipe dream, but alas, only for the citizen!

 Karnataka petrol diesel price hike: Petrol prices have been raised in Karnataka on June 16th. Residents of the state are now expected to shell out an additional three rupees per litre, reaching almost 103 rupees per litre of petrol from under 100 rupees till last week  Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today