Petrol Price Can Come Down To Rs 75 If Brought Under GST: SBI Economists

Fuel Price Hike: The economists added there is a lack of political will, which is keeping the Indian oil product prices at one of the highest in the world.

Petrol Price Can Come Down To Rs 75: SBI Economists | File Image

Amid the ongoing hue and cry over petrol price hike, the economists at the State Bank of India (SBI) on Thursday said the petrol price can go down to Rs 75 per litre across the nation if brought under the ambit of the Goods and Services Tax (GST).

The economists, however, added there is a lack of political will, which is keeping the Indian oil product prices at one of the highest in the world.

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The calculation made by the economists under the assumption of global crude prices at USD 60 a barrel and exchange rate at Rs 73 per dollar suggests diesel will come at Rs 68 a litre and the revenue loss for the Centre and states will be only Rs 1 lakh crore or 0.4 per cent of the GDP.

Pointing out that bringing petrol and diesel under the goods and services tax is an unfinished agenda of the GST framework, the economists said getting the prices under the new indirect taxes framework can help.

“Centre and states are loathed to bring crude oil products under the GST regime as sales tax/VAT (value-added tax) on petroleum products is a major source of own tax revenue for them. Thus, there is a lack of political will to bring crude under the ambit of GST,” PTI quoted the economists as saying.

Explaining further, the economists said the states at present choose to levy a combination of ad valorem tax, cess, extra VAT/surcharge based on their needs, adding these taxes are imposed after taking into account the crude price, the transportation charge, the dealer commission and the flat excise duty imposed by the Centre.

Coming at the final price estimates, the economists observed assuming for the crude prices and dollar rate, transportation charges at Rs 7.25 for diesel and Rs 3.82 for petrol, dealer commission of Rs 2.53 for diesel and Rs 3.67 for petrol, cess of Rs 30 for petrol and Rs 20 for diesel which will be divided equally between the Centre and states, and the GST rate at 28 per cent.

As of now, every state has its own way of taxing fuels while the Centre also collects its own duties and cess.

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The economists recommended the “government build up an oil price stabilisation fund which can be used in bad times for compensating revenue loss by cross-subsidising fund saved from good times without hurting the consumer”.

The observation came as petrol prices have touched Rs 100 per litre in some pockets of the country.

The economists while talking about the LPG cylinders proposed an increased and graded subsidy may be provided to poor consumers which can be tapered off over a period.