GST Rate Cuts Leave Petrol and Diesel Prices Unchanged

Under the latest goods and services tax (GST) reforms, prices for over 375 goods are set to change, yet petrol and diesel prices remain unaffected.

The revised GST structure has consolidated previous tax slabs into two main categories of 5% and 18%. While certain goods like Indian breads are exempt, high-revenue items such as petrol have not seen a price reduction.

Diesel and petrol are among the most heavily taxed products in India, vital for both central and state governments.

State governments are cautious about including petrol and diesel under GST, as it could restrict their taxing powers.

Currently, states have the authority to impose a value-added tax (VAT) on petrol and diesel independently. Both the central and state governments justify the heavy taxation of fuels as essential for funding social welfare programs.

These commodities are significant revenue sources for both central and state governments through excise duty and VAT. In several states, they account for over 25-30% of tax revenue. States fear losing control over taxation policy, pricing, and the ability to influence consumption patterns through excise duty and VAT.