Petroleum Products Under GST: A Trade-Off Between Government Revenue and Consumer’s Welfare

Abstract

The Goods & Service Tax (GST) which was introduced in 2017, aimed at creating a single unified market for all products throughout the country. Though it included majority of the products, few products were kept out of its ambit and Petroleum products were one amongst of these exemptions. The reason to exclude petroleum products was simple- Lucrative Tax revenues enjoyed by both the Centre & the states, which would shrink considerably under GST regime. However, in recent times, when the prices of petrol & diesel have skyrocketed, the discussion around bringing these products into GST have again gained momentum. There is a dilemma, on one hand, experts consider that getting petroleum products under GST would reduce the prices and provide support to the consumers, others suppose such move could further dampen the government finances already affected by Covid-19 pandemic.