GST Rates Reduced, But Why Are Petrol and Diesel Still High-Priced? Here's What You Need to Know

Under the next-gen goods and services (GST) tax reforms, over 375 goods will undergo a price change, however, this has not been reflected in the prices of petrol and diesel.

The new GST framework has replaced the earlier in place tax slabs with mainly two categories - 5 per cent and 18 per cent. Meanwhile, certain goods such as varying form of Indian breads such as roti are exempted from this levy, but prices of high revenue -generating products like petrol have not dipped.

Also Read: Festive Cheer Lifts Auto Demand as GST 2.0 Spurs 20-25% Growth

Are Petrol, And Diesel Not Included Under Revised GST?

Currently, diesel, and petrol make for one of most taxed products in India as they are crucial items for central, and state administrations.

The states government has become cautious about bringing petrol and diesel under the GST's ambit given it would limit taxing abilities.

Currently, the States have the authority to independently levy a value-added tax (VAT) on petrol and diesel. Both the centre and the states justify the heavy taxation of fuels heavily by claiming that the revenue generated is essential for financing social welfare programmes.

These commodities are major revenue sources for both the Central and state governments through excise duty and VAT. For several states, these contribute over 25-30 per cent of their tax revenue. States fear losing control over taxation policy, pricing, and the ability to influence consumption patterns through excise duty and VAT.