BJP leader Sushil Kumar Modi on Wednesday said it is not possible to bring petrol and diesel under the GST regime for the next eight to 10 years as it would cause an annual revenue loss of Rs 2 lakh crore to all states.

Centre and states collectively collect over Rs 5 lakh crore tax on petroleum products, Modi told the Rajya Sabha while participating in a discussion on the Finance Bill 2021.

The statement assumes significance in view of the rise in petrol price for the past over one year which even touched Rs 100 per litre in some states.

In the first reduction in rates in over a year, petrol price on Wednesday was cut by 18 paise per litre and diesel by 17 paise a litre as international oil prices tumbled to the lowest since early February.

Petrol price was cut to Rs 90.99 a litre in Delhi from Rs 91.17 per litre. Diesel now comes for Rs 81.30 a litre in the national capital, down from Rs 81.47 previously.

Rates have been reduced across the country and vary from state-to-state depending on the local incidence of taxation (VAT).

This is the first reduction in fuel prices in over a year. The prices were last reduced on March 16, 2020.

“It is not possible to bring petrol and diesel under GST regime in the next eight to 10 years because states would not be ready for an annual revenue loss of Rs 2 lakh crore (collectively by all states),” Modi told the House.

“If petrol or diesel would be brought under the Goods and Services Tax (GST) regime then how would the loss of Rs 2 lakh crore revenue to states be recovered. The Centre and states together earn over Rs 5 lakh crore from tax on petroleum products,” he said.

He explained that if petroleum products are brought under the GST, 28 per cent tax would be collected on them as that is the highest slab in the tax regime.

“Presently, 60 per cent tax is being collected on petroleum products. This would result in shortfall of Rs 2 lakh crore to 2.5 lakh crore (to both Centre and states),” he explained in the House.

“If we collect 28 per cent tax on petroleum products, then only Rs 14 would be collected (per litre) against Rs 60 at present,” he pointed out.

“If petrol or diesel price is Rs 100 (per litre) then the tax component is Rs 60 which includes Rs 35 for Centre and Rs 25 for respective states. Besides out of the Rs 35 tax per litre, 42 per cent goes to states,” Modi added.

He also stated,”It is said that tax collected on petrol, diesel goes into the pocket of government. There is no separate pocket of government. From where the money will come for providing electricity and tap water to all households. The spending of tax collection on welfare of country is being challenged.”

Reacting to remarks against the GST regime, he said,”Some people also said that this is Gabbar Singh Tax. No state has opposed the tax structure of GST in any GST Council meeting. You can see the proceedings of the council (to verify that),” he said.

He stressed that only the government under the leadership of Prime Minister Narendra Modi had the guts to implement the GST regime in the country.