As we all know that the goods and service tax (hereinafter referred to as “GST”) was passed by the Lok Sabha and Rajya Sabha in the year 2017 with a motive of “one nation, one tax”. During the initial stage, the Finance Ministry’s draft proposed to keep crude oil, petrol, diesel, aviation turbine fuel (ATF), and gas outside the scope of the GST. However, simultaneously, they had an aim to bring all of them under the GST regime after its complete and successful implementation in the country. State’s revenue is mostly dependent upon the petrol and diesel to meet their budgetary expectations and expense, seeing which petrol and diesel were not included in the GST. India imports around 80% to 85% petrol and diesel to satisfy the day-to-day oil needs of the country, therefore, the retail prices depend upon the prices in the international market. Prices of oil products are decided out of the demand supply formula. Prices of petrol and diesel have a direct relation to every product we consume/use and majorly, it used in a supply chain. Therefore, if the prices of petrol or diesel rise, it will lead to an increase in the prices of other daily usage commodities impacting the lives of the common people.

Under the current tax structure, the consumers are required to pay three major taxes on petrol and diesel which include excise duty (charged by the Centre), value added tax (charged by respective States), and the dealer’s commission/margin. The pandemic times have led the Central and State Governments to increase excise duty and VAT to fund the government schemes, vaccination drive, etc., to satisfy/manage the country’s economy. Talking in a general sense, the combined price of per litre petrol and diesel include around 45% to 53% of the taxes; whereas, if petrol and diesel get included in the GST, the same would constitute around a maximum of 28% of the taxes. The difference is very much clear as to that why the public is demanding the inclusion of petrol and diesel in GST.

The reason why some States are opposing the inclusion of petrol and diesel under the ambit of GST

Revenue of some States like Rajasthan, Madhya Pradesh, Maharashtra, etc. is mostly dependent upon the revenue generated through VAT on petrol and diesel, so if petrol and diesel are included in the GST, then their revenue might fall heavily. Fearing this, some States are opposing the move of inclusion of petrol and diesel under the ambit of GST. In Kerala Pradesh Gandhi Darshanvedhi v. Union of India[1], the Kerala High Court ordered the GST Council to consider the inclusion of petrol and diesel under GST. In the 45th GST Council meet at Lucknow, Uttar Pradesh on 17-9-2021, all States unanimously opposed the idea with a thought that it would disrupt the State’s revenue. Since 2017, it is the States who are opposing the inclusion of petrol and diesel under the GST regime. Few States are demanding that if petrol and diesel are brought under the GST, then the Central Government must compensate all the States of their deficit revenue. The Central Government showed their incapability to compensate the States of their deficit revenue which has hindered this process overall. It is because of “revenue implication” the Central Government and State Government is fearing the inclusion of petrol and diesel under the GST.

So, this fear of revenue considerations must be jointly addressed and resolved by the Central and State Government to solve this problem. Otherwise, it is the common citizens who will suffer the most due to the rising prices of petroleum products. We should understand that it is the GST Council who in consultation, discussion and approval with the State Governments can only bring this urgent amendment.

Will the inclusion of petrol and diesel under the GST solve the problem?

Now, the important point for consideration is here that whether the inclusion of petrol and diesel in the GST will solve the problem of their rising prices? The answer is yes, it would substantially lower the prices of petrol and diesel, ultimately benefiting the end consumer. But we must also examine its overall effect and impact on the country’s overall future. Petroleum products are derived out of fossil fuels which are getting exhausted and at some point, of time shortly, we will have to limit their usage in daily lives. In the short run, lowering the prices of petrol and diesel will prove helpful but ultimately, all the consumers will have to start shifting towards renewable energy sources for sustainable growth and development. Rather than focusing on the inclusion of petrol and diesel in GST, what if we as a country do some strict and deep research on the topic of finding out serious methods to promote the shifting towards renewable energy immediately. History has been evident that even if the prices of oil barrel has fallen down the Government has not decided to lower the prices but let them remain stagnant. We are just focusing on part only but the inclusion of petrol and diesel under the ambit of GST might bring some sort of other discrepancies that the Governments might use to keep their prices higher to fulfil revenue needs. The aftermath of its inclusion must be drawn beforehand to be ready with the upcoming challenges or problems which might be faced by the general public because everything has its pros and cons, the same would happen with the inclusion of petrol and diesel in the GST. All around the country, we are even witnessing the dire need for further upgradation and amendment in the tax regime under GST, and micro, small and medium enterprise (MSME) sectors are also demanding to resolve the complexities attached with the GST. This point has been mentioned here to take the complexities of GST into cognizance, so that if petrol and diesel are included in the GST, then we are ready with the strategies to cope with them. The aspect of politics in this process cannot be ignored because the spirit of cooperative federalism is losing its spirit in the country which makes policy implementation much harder these days.

BBA LLB (X Semester), New Law College, Bharati Vidyapeeth (Deemed To Be) University, Pune and Legal Trainee, Mehta Chambers Law Office, Jodhpur (Rajasthan). Author can be reached at

[1] 2021 SCC OnLine Ker 2674.

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