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Finshots Daily
Why GST may not make fuel cheaper
Jun 25, 2024
The podcast delves into the impact of fuel prices on both dealers and consumers, highlighting strategies like refueling in states with lower prices. It also discusses why including fuel in the GST system may not necessarily lead to cheaper fuel due to implications on state revenues and living costs.
05:54
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Quick takeaways
- Bringing fuel under GST could lead to revenue losses due to current state tax dependency on fuel taxes.
- Applying GST to fuel may require a high GST rate, impacting consumer expenses and necessitating careful consideration for revenue balance.
Deep dives
Challenges of Including Fuel in GST
Many consumers and fuel dealers advocate for bringing petrol and diesel under the ambit of GST to lower costs. However, the complexity arises due to the substantial revenue earned by states from fuel taxes. States depend significantly on fuel tax revenue, accounting for 11-17% of their total tax revenue. Bringing fuel under GST would require a high GST rate, potentially leading to revenue losses. The current tax structure allows states to charge varying rates of tax on fuel, influencing the price differences across states.
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