New Delhi: A peak tax rate of 28 per cent 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, a top government official said.
The peak GST rate plus VAT will 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.
But before the two fuels are put under GST, the Centre has to decide if it is willing to let go of the about Rs 20,000 crore of 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 that 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 intimately involved with the GST implementation.
The timing of including petro products in GST will be a political call which centre and states have to take collectively, he said.
The Centre currently levies a total of Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel. On top of this, states levy Value Added Tax (VAT) - the lowest being in Andaman and Nicobar Islands where a 6 per cent sales tax is charged on both the fuel. Mumbai has the highest VAT of 39.12 per cent on petrol while Telangana levies highest VAT of 26 per cent on diesel. Delhi charges a VAT of 27 per cent on petrol and 17.24 per cent on diesel.
The total tax incidence on petrol comes to 45-50 per cent, and on diesel, it is 35-40 per cent. (With PTI inputs)