DGGI detects GST fraud worth ₹506 crore

 







There was high expectation of late that the Centre would bring fuel under the Goods and Services Tax (GST) ambit, which would give a big reprieve to consumers reeling under high fuel prices. At the GST Council meeting held on September 17, the issue was taken up for discussion. However, it was decided that it was not yet ‘the right time’ to include fuel within GST. This means consumers will have to bear with the high cost of petrol and diesel for longer.


On September 21, petrol cost Rs 101.19 a litre in Delhi, while diesel was priced at Rs 88.62. In Mumbai, both the fuels were costlier, with petrol at Rs 107.26 and diesel at Rs 96.19 per litre. Compare this to where fuel prices stood in March 2020, at the beginning of the Covid-19 pandemic in India. Petrol then cost around Rs 70 a litre in Delhi, while diesel was around Rs 63. That means petrol prices have risen by over Rs 31 in 16 months, while diesel prices have grown by nearly Rs 25. Higher fuel prices stoke inflation as has been seen in recent months. The rising prices of crude oil in the global market haven’t helped either. Brent crude cost $74.79 a barrel in the international market as on September 21. In September last year, they cost just around $40 a barrel. India imports nearly 80 per cent of its crude oil requirements.

When GST was introduced in July 2017, five commodities—crude oil, natural gas, petrol, diesel and aviation turbine fuel—were excluded from its ambit, since the Centre and states depended heavily on these for their revenues. The general expectation was that if the central and state taxes are replaced by GST, where the highest tax slab is 28 per cent, there would be a substantial reduction in fuel prices. According to certain estimates, replacing central and government taxes with 28 per cent GST will lower petrol prices in Delhi to around Rs 56 and diesel prices to around Rs 55.

Taxes on fuel have been a major source of revenue for central and state governments, which is a key reason why they do not want to bring it under GST. Taxes comprise 55.5 per cent of the retail price of petrol in Delhi and nearly 46 per cent of diesel. For instance, on September 16, the central taxes (excise) on petrol in Delhi was Rs 32.90, and on diesel, it was Rs 31.80. The duties imposed by the state (value added tax or VAT) was Rs 23.35 for petrol and Rs 12.96 for diesel. For 2020-21, the Centre earned Rs 3,71,726 crore from excise on fuel, while states earned Rs 2,02,937 crore.

n June this year, the Kerala High Court had directed the GST Council to forward a representation to the Centre to bring petrol and diesel under the GST regime and take an appropriate decision within six weeks. This was following a public interest litigation by the Kerala Pradesh Gandhi Darshanvedi, which prayed that these fuels be included in the GST so “as to achieve a harmonised national market as contemplated under Article 279A(6) of the Constitution of India.”

Union finance minister Nirmala Sitharaman, who chaired the September 17 GST Council meeting, said that the topic of inclusion of fuel in GST was taken into the agenda purely because of the Kerala High Court’s instructions. “The Council had discussed it, and (it) felt that it was not the time to bring the petroleum products into the GST,” she told the media after the council meeting. She also said that “members” were of the view that petroleum products should not be included in the GST, without specifying any particular state. However, media reports have said that Kerala, Tamil Nadu and the BJP-ruled state of Karnataka had vehemently opposed such an inclusion, since it would hamper their revenues.

Kerala’s finance minister K.N. Balagopal said that bringing fuel under GST would not lower the price of fuel and wanted the Centre to lower excise duties first. “The Union government is already collecting Rs 28 for diesel and Rs 26 for petrol as cess. It is a special cess outside the divisive pool. It is not shared with the states. Another Rs 4 is charged for a litre of diesel as agricultural cess. So, if the government wants to reduce the price, the cess has to go,” he said. Earlier, he had said that bringing fuel under GST would result in losses worth Rs 8,000 crore to his state, annually. Since the additional levies are not shared with the state governments, the Centre should reduce those, he said.

Palanivel Thiagarajan, finance minister of neighbouring Tamil Nadu, said on September 21 that his government was ready to reconsider its decision on the issue of bringing fuel prices under the GST regime provided the Centre gives up the cess surcharge on petrol and diesel.

There will be more pressure on the Centre to lower fuel prices, and at some stage it will again have to look at including fuel under GST. Better GST collections should offer it some leeway to consider such measures. With the easing of the second wave of Covid-19, and the pace of vaccination picking up (India had administered vaccines to over 810 million people as on September 21), GST collections, which had lagged in some months, are expected to pick up. Recent data already show a rapid improvement in both GST and excise/ cess collections. GST collections at Rs 1.16 lakh crore in July were higher than in both May (Rs 1.02 lakh crore) and June (Rs 92,849 crore). With average daily e-way bills generated in July higher than in June and May, the outlook for collections is significantly brighter, says a recent note from Care Ratings.

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