As discussions continue regarding the inclusion of petrol and diesel in the Goods and Services Tax (GST), Sanjay Kumar Agarwal, the Chairman of the Central Board of Indirect Taxes and Customs (CBIC), stated that it may not be feasible to bring these fuels under the indirect tax system at this time. When asked about the possibility of including petrol and diesel in GST, Agarwal explained to IANS that these fuels are currently subject to central excise duty and value-added tax (VAT), which provide significant revenue to both the states through VAT and the central government through excise duty. “Considering the revenue implications, it may not be possible to include these items in GST for the time being,” he remarked.
Agarwal’s comments followed Finance Minister Nirmala Sitharaman’s statement last week indicating that the central government had intentionally excluded petrol and diesel from the GST Council proposal. She noted, “Legally, we are ready, but this decision must come from the states.” According to Sitharaman, there were discussions about including these fuels in GST even during its initial implementation, recalling conversations with her late predecessor, Arun Jaitley. She added that once the states reach an agreement, they would need to decide on the tax rate within the council, and that decision would then be enacted.
Since the GST’s introduction in July 2017, petrol, diesel, and alcoholic beverages have remained outside its scope, as these items are crucial revenue generators for both the central and state governments via excise duty and VAT, with many states relying on them for over 25-30 percent of their tax income. States express concern over losing control of their taxation policies, pricing, and the capacity to affect consumption patterns through excise duty and VAT.