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Published: Feb 17, 2023
Updated: Feb 17, 2023

Indian Finance Minister Announces Plan to Include Petrol and Diesel under GST Regime, Pending State Agreement

The Indian Finance Minister, Nirmala Sitharaman, has announced that the country plans to bring petrol and diesel under the Goods and Services Tax (GST) regime. The move is pending agreement from the states, but the Finance Minister has said the central government is ready to make the change. This is a long-standing demand from the industry, and analysts argue that it will help in controlling inflation and boosting industrial growth.

Most goods and services in India are already covered by GST, which was rolled out in July 2017. However, petroleum products like petrol, diesel, ATF, and natural gas are still outside the ambit of GST and continue to attract the legacy taxes like VAT, Central Sales Tax, and Central Excise Duty.

Challenges Posed by Global Uncertainties

Speaking at an interactive meeting organised by industry body Assocham, the Finance Minister said that global uncertainties pose a significant challenge to the Indian economy, especially the export sector. She noted that while India has experience in handling uncertainties arising from domestic issues such as monsoons and unfavorable weather conditions, the ongoing global challenges arising from the disruptions caused by the Covid pandemic and the Russia-Ukraine war are far more complicated.

Customs Duty Changes in the Union Budget

In the Union Budget 2023-24, the Finance Minister announced changes in customs duty, keeping in view the interests of Indian exporters and MSMEs. She noted that a very keen eye is being kept on what is happening at India's borders in terms of exports and imports. Specific items are being monitored to determine which are going to be continuously needed for the next few years and which are going to hurt the country.

Widening Trade Deficit

Alluding to the widening trade deficit due to the surge in imports, the Finance Minister said that India cannot be inward-looking and prevent imports. Instead, several MSMEs and large manufacturers need those critical components to come from elsewhere. India's trade deficit widened to $232.95 billion in the first 10 months of the current financial year, as against $153.79 billion recorded in April-January 2021-22.

Will be a game changer if implemented

The inclusion of petrol and diesel under the GST regime will be a significant change for the Indian economy, but the decision ultimately rests with the GST Council. The move could help control inflation and boost industrial growth, but it will take agreement from the states before it can be implemented. Meanwhile, India faces ongoing challenges from global uncertainties, and the government is keeping a close eye on its borders in terms of both imports and exports.