Should petroleum products be brought under the Goods and Service Tax (GST)? And if your answer is in the affirmative, the why do you believe so? How will the change impact the economy of our country? In addition to that thought, when we refer to petroleum products, do we mean all of them? Or are we talking about just a particular few in detail?
Well, all of these are very important questions. And all of them deserve to be answered accurately and justifiably. So let us tread slowly and steadily, to find the required answers to our questions in specifics. Before we delve into the impact of the change on the economy of our country, let us understand why is meant by the term petroleum products, and how do we use these articles. Once we know how valuable a substance like petroleum is to us, we may be better justified in making a decision or a strong opinion.
What is meant by petroleum products?
Petroleum products are all those materials that have been derived from crude oil. They are processed in refineries. They are of course, not the same thing as petrochemicals. Petrochemicals are usually a collection of well-defined, pure chemical compounds. On the other hand, petroleum products are complex mixtures, and invariably not pure.
Petroleum is derived from two words. These two words are “petra” which means rock in Latin, and “oleum” which is the Latin translation of oil. It is, in short and simple words, the oil that is obtained from certain rocks and minerals. For this reason, it is also popularly called as mineral oil. It is in fact, a highly flammable substance, composed of multiple hydrocarbons.
You must have already heard that petroleum is usually referred to by the term “liquid gold”. It earned this name because of its high price, precious value, economic need and great demand. It has a very high commercial value. Each and every drop of petroleum is way too valuable to be wasted.
But why is the term liquid also added to its description? Well, that should be more than obvious. Petroleum is mined and found in the liquid state. And value wise, it is probably more precious than gold itself. In addition to this, it is non-renewable and hence, there is only a limited stock of petroleum.
In fact, it has been claimed and predicted by scientists that all the known petroleum reserves are going to be completely depleted and finished with within the next hundred years. And in the world of today, petroleum products are used in almost every activity. We hardly even realise how often we are using its products.
Petroleum also serves as a source of multiple organic compounds, more than we could think of. There are, in addition to these organic compounds, more than six thousand items made from petroleum wastes and its by- products.
We often do not realise that we are using these products in our day to day lives. In the fertilisers in our beautiful gardens, in the perfumes and deodorants sprayed all over our bodies, the insecticides used almost daily, the Vitamin Capsules, body soap, and, as obvious from its name, petroleum jelly.
There are only three main petroleum reserves in India. The biggest one, at present, is in the Arabian Sea, almost one sixty five kilometres off the coast of Mumbai. It is strategically named Mumbai High. It supplies almost fourteen percent of India’s oil requirements by itself. It has accounted for more than thirty eight percent of the domestic production of India when it comes to petroleum products.
Why should Petroleum Products be brought under the Goods and Service Tax?
We must conclude that petroleum products should be brought under the Goods and Service Tax (GST). This is concluded from the fact that Gas sales, including the Compressed Natural Gas (CNG) and other piped gas supplies used to attract a Value Added Tax (VAT) ranging from five to twelve percent (5 – 12 %). This leads by example that petroleum products should be brought under the Goods and Service Tax.
In fact, there has been a hike in the fuel prices all over the country. This is due to international factors, all over the world. This unusual yet expected and predicted surge in prices can basically be attributed to the political and economic situation at the international level.
Due to these conditions, it has become absolutely necessary to bring petrol and diesel under the purview of the Goods and Service Tax. Just because these two products are not under the tax as of now, our nation is compelled to bear a heavy loss of fifteen crore rupees. Hence it will most definitely be better for all the involved customers if these two items were included under the Goods and Service tax.
However, the Centre and the State government are not completely on board with the inclusion of petroleum products under the GST. Why is this so? Well, if these products were to be brought under the tax, the governments would face an unfavourable and unbearably heavy revenue loss. If the two fuels are put under the Goods and Service Tax, the Central government will have to let go of the twenty thousand crore rupees input tax credit that it currently pockets.
Earlier, the former Oil and Petroleum Minister Dharmendra Pradhan had also made a strong case for the inclusion of natural gas under the Goods and Service Tax, saying that if the horribly polluting coal can be included under this tax, then the environment-friendly fuel that the natural gas is certainly deserves a place in the new regime. He terms it as nothing less than “essential” to bring petrol as well as diesel under the Goods and Service Tax as soon as possible. He also mentioned that he favours bringing other petroleum products under the GST gradually.
Which petroleum products are going to be brought under the Goods and Service Tax?
Out of every five petroleum products, at least two products are going to be brought under the Goods and Service Tax, according to the discussion held by the Finance Ministry of India at the Goods and Service Tax Council. The aviation turbine fuel, also known as the ATF, as well as natural gas, are going to be among the first petroleum products to be brought under this tax. This deal is thankfully already in motion, running earlier than prepared schedule.
In the last term of the Modi Government, the Ministry and the Council had firmly come to the decision that they would not include the five main petroleum products under the Goods and Service Tax. These five products are crude oil, petrol, diesel, Aviation Turbine Fuel and natural gas.
However, they suggested instead, that other products, such as cooking gas, kerosene, and naphtha should be included under the tax in the new regime. This was all part of the government’s efforts to build consensus with all States on the new Goods and Services Tax launch. That has all changed favourably now, and the new regime is much more well-thought out and friendly to our country.
To conclude, I think it would be wiser to bring the petroleum products, especially Aviation Turbine Fuel and Natural Gas, as well as both petrol and diesel, under the Goods and Services Tax. It will most certainly benefit our country in an immense way. And we must do whatever it is that we can to help India grow.
However, this argument is not one that can be settled very easily. Opinions of different people are always going to be varying and differing in some aspect or the other. It is safer, hence, to stick to your own opinions and voice it out only when backed up with a truckload of statistics and evidence.