Bringing petrol and diesel under the GST regime could lead to a loss of as little as ₹1 lakh crore in annual revenue for the Centre and States while bringing pan-India prices of the fuels to ₹75 and ₹68 a litre, respectively, as per an SBI Research report.
With pump prices of petrol crossing the ₹100-per-litre mark in some States, Reserve Bank Governor Shaktikanta Das had expressed hope for a ‘calibrated and co-ordinated reduction’ in the high taxes levied by the Centre and States on fuels.
Tax revenue
Finance Minister Nirmala Sitharaman had said last week that the Centre and States needed to discuss fuel taxes as they were a major source of tax revenue.
Assuming a GST rate of 28%, cess of ₹30 and ₹20 for a litre of petrol and diesel respectively (shared equally between the Centre and the States), crude oil price of $60 per barrel and a rupee-dollar exchange rate of 73, SBI Research has reckoned the Centre and States would, together, face a revenue deviation from Budget estimates of only ₹1 lakh crore, or 0.4% of the GDP, in FY22.
The report has adjusted for a rise in consumption if the fuel prices are reduced and assumed a 10% growth in petrol and 15% rise in diesel consumption in 2021-22.
Lower fiscal deficit
India’s fiscal deficit in 2020-21 may turn out to be lower than the revised estimate of 9.5% of the GDP at about 8.7%, and the government might lower its borrowings which could help lower yields on its securities by the end of March, an SBI Research report said.
Tax receipts have been bolstered by indirect taxes, including excise duties, while the government has still about ₹5.90 lakh crore to be spent over the last two months of 2020-21, including ₹76,000 crore in capital expenditure, ₹1.73 lakh crore in interest payments and ₹3.43 lakh crore in subsidy payments, according to the report.
