Recently SBI (State Bank of India) published a report on Fuel prices in India. The report highlights that, the pan-India Prices of fuels will drop if the petrol and diesel are brought under the GST regime to Rs 75 and Rs 68 a litre, respectively.
- State Bank of India report further highlights that, if we assume the GST rate of 28%, cess of Rs 30 and Rs 20 on a litre of petrol and diesel respectively, crude oil price of US$ 60 per barrel and rupee-dollar exchange rate of 73; then it will face a revenue deviation from Budget estimates by only Rs 1 lakh crore which accounts for 0.4% of the GDP for the financial year 2021-2022.
- SBI report also adjusted for the rise in consumption if prices of the fuel are reduced. It also assumed a 10 per cent growth in petrol and 15% rise in diesel consumption in the fiscal year 2021-22.
- It also said that, the fiscal deficit of India in the financial year 2020-2021 could turn out to be lower as compared to the revised estimate of 9.5 per cent of GDP to stand at about 8.7 per cent.
- So, the report suggests that, government can lower its borrowings which will help in lowering the yields on its securities.
- According to the report, the Tax receipts have been bolstered by the indirect taxes which also include excise duties but the government has still about Rs 90 lakh crore which could be spend for two months of the financial year 2020-21
SBI report suggests that, central government and state government should discuss the fuel taxes as they are the major source of tax revenue. RBI had also asked for a “calibrated and coordinated reduction” in the taxes which the state and central government levy.
Fuel Prices will drop if Brought under GST Fuel Prices will drop if Brought under GST