Reasons for Keeping Petroleum & Alcohol out of GST

GST (Goods and Service Tax) in India is regarded as one of the largest taxations that has taken place in India and also passed by the Indian Government. India has adopted two GST that means GST will be administrated both by the State Government as well as by the Central Government.

 In keeping the federal structure of India, it is proposed that the GST will be issued both by the Central Government (CGST) and the State Government (SGST). Prime Minister Narendra Modi introduced GST in India on the midnight of 1st July 2017.The development of GST took many negotiations as well as revisions before getting launched in India in its final form in the year 2017.

Goods and Service Tax (GST) is an indirect tax in India imposed when a customer buys a good. GST is regarded as an indirect tax imposed on the sale, manufacture, buying of goods. The aim of GST is to remove all the indirect taxes imposed on goods by the Indian Central governments and State governments. But at present, few following items are kept out of GST in India and they are:

Petroleum products:  Minister of Oil Dharmendra Pradhan has requested the Minister of Finance Nirmala Sitharaman to bring the petroleum products out of GST. Petroleum products includes motor spirit (petrol), natural gas, high speed diesel, petroleum crude, aviation turbine fuel etc. are temporarily kept out of GST in India when it was introduced on 1st July, 2017. The products are kept out of GST because the prices of fuel are different in various states. Besides, the council of GST kept this product out from the GST because for the revenue the state government depends on them. However, the council shall decide the date from which the petroleum products shall be included under GST

Alcohol: Though alcohol has been kept out of the GST, it still falls under the other taxes as well which makes the price of the liquor high and the taxes are: a) VAT (Value Added Tax); b) Excise Duty. The reasons of keeping alcohol out of GST are the following:

  1. To make sure that the state government continue to have a high income of revenue.
  2. The prices of alcohol & beer are kept high so that the consumption becomes less.

However, keeping the liquor out of GST the prices becomes high after the spread-out of GST (Goods and Service Tax) because for the manufacture of alcohol the inputs used here were taxed at 12-15% under the VAT administration before GST. Another reason for the  rapid increase in the price of the liquor is because transport as well as cargo charges falls under the GST

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