Bringing petrol and diesel under the GST regime could result in a loss of diesel 1 lakh crore for the Center and the states, with respectively a reduction in fuel prices to ₹ 75 and ₹ 68 per liter in annual revenue for the Center and the States. Per SBI Research Report.
With petrol prices crossing the 100 per liter mark in some states, Reserve Bank Governor Shaktikanta Das expected a ‘calibrated and coordinated cut' in higher taxes on fuel by the Center and the states.
Finance Minister Nirmala Sitharaman said last week that the Center and the states needed to discuss fuel taxes as they were a major source of tax revenue.
The GST rate of cess of 28%, ₹ 30 and a 20 (shared equally between the Center and the States) for a liter of petrol and diesel respectively, the price of crude oil is $ 60 per barrel and the rupee-dollar exchange rate 73 value. Taken, SBI Research has stated that the Center and the states together faced only revenue deviation of ₹ 1 lakh crore or 0.4% of GDP from budget estimates in FY'22.
If fuel prices go down and diesel consumption is increased by 15% in 2021-22, the report adjusted for increased consumption.
Reduced fiscal deficit
India's fiscal deficit in 2020-21 could be lower by about 8.7% from the revised estimate of 9.5% of GDP, and the government could reduce its borrowings which could help lower yields on its securities by the end of March, SBI Research report said.
Indirect taxes including excise taxes have reduced tax receipts, while the government has spent approximately ₹ 5.90 lakh crore in the last two months of 2020-21, including ₹ 76,000 crore in capital expenditure, ₹ 73 lakh crore in interest. According to the report, 3.43 lakh crore in payments and subsidy payments.