GST on Petrol in India

The discussion around GST on petrol in India has continued ever since the Goods and Services Tax system was introduced. Petrol remains outside the GST framework, even though most goods and services are now taxed under a single system. This has kept fuel taxation complex and uneven across states.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

Is GST Applicable on Petrol in India?

At present, GST on petrol is not applicable. Petrol is taxed through central excise duty imposed by the Union Government and value-added tax (VAT) charged by individual states. As a result, petrol prices vary from state to state. Although the GST law allows petrol to be included, the government has not notified a date for its implementation.

Why Petrol Is Still Outside GST

The GST Council has the authority to decide when petrol will come under GST. However, this requires agreement from all states. Fuel taxes contribute significantly to state revenue, and many states fear losses if GST on petrol is introduced. This concern has slowed down decision-making.

Possible GST Rate on Petrol

If petrol is brought under GST, it is likely to be placed in the highest tax slab of 28 per cent, possibly with an additional cess. Even at this rate, studies indicate that petrol prices could reduce compared to current levels. The removal of multiple taxes would also prevent tax-on-tax, which exists today.

Benefits of GST on Petrol

GST on petrol could lead to uniform fuel prices across India. It would simplify taxation and improve transparency. Businesses may also benefit from input tax credit, which is not available under the current fuel tax system. Consumers could see a modest reduction in retail prices.

Choose ELSS mutual funds for disciplined equity investing with the added benefit of tax savings. 

Conclusion

GST on petrol in India is legally permitted but politically and financially sensitive. While it offers clear advantages such as price uniformity and simpler taxation, implementation depends on consensus between the Centre and states. Until then, petrol will continue to be taxed under the existing excise and VAT structure.