A peak tax rate of 28%, plus States levying some amount of local sales tax or VAT on petrol and diesel, is likely to be the tax structure when the two auto fuels are covered under the GST regime, said a top government official.
The peak GST rate plus VAT would be equal to the present tax incidence, which is made up of excise duty levied by the Central Government and VAT charged by the States.
Centre to decide
But before the two fuels are put under GST, the Centre has to decide if it is willing to let go of the ₹20,000-crore input tax credit it currently pockets by keeping petrol, diesel, natural gas, jet fuel and crude oil out of the Goods and Services Tax (GST) regime which came into force from July 1, 2017, the official said.
“There is no pure GST on petrol and diesel anywhere in the world and so in India too, it will have to be a combination of GST and VAT,” said the official, who is closely involved with the GST implementation.
The timing of including petro products in GST will be a political call which the Centre and States will have to take collectively, he said.
The Centre currently levies a total of ₹19.48 per litre as excise duty on petrol.