On Wednesday, Prime Minister Narendra Modi said that his government would take natural gas under the purview of our goods and services tax. Since GST only applies to value added, this change protects the refined product from the tax cascade at its use, reduces its final price and thereby helps to increase the consumption intensity of India as part of a larger plan for our inclination. Power Mix towards relatively clean fossil fuel. Gas-fired power plants threaten our planet more than generators that burn coal. While Modi has not drawn up a timetable for the switch, his statement of intent is a very bold step to keep all hydrocarbons under GST, a tax system that has yet to be universalized. For the purpose for which GST exceeds its purpose, it should cover all goods and services. But tax reformers find it very difficult to eliminate the loss of various taxes that have been pumped into fuels for decades. Demand for fuel is relatively volatile, as is alcohol consumption, which has been kept out of India’s GST regime. Rising prices will not greatly reduce offtech. This makes it an easy goal to increase revenue. But at the central and state levels, governments need to get rid of this addiction.
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Everyone knows that pre-GST taxes can lead to financial inefficiency. Value Added Tax (VAT) is one of these. There is also excise duty, which often includes sales tax, and their burden falls heavily from one link of the value chain to another, arrears to be paid on bills containing previously paid tariffs. In this way, they not only increase retail prices, but also thwart the specialization that allows them to create more value with less resources, as Adam Smith illustrated in 1776 with the example of his ‘pin factory’. Worldwide, apart from crude oil extraction, energy production and retail are increasingly vertically connected business, but this does not have to be the case. Because retail skills and refinery capacity are different, their division into businesses maximizes the potential for both the benefit of consumers. Our big problem in this area, however, has more to do with applicable exploitation rates. This is another reason why crude oil, petrol, diesel, gas and aviation turbine fuel are under construction at a much lower rate of GST.
Petrol is currently selling over ₹At Rs 100 per liter in Rajasthan, the charge on this fuel is the highest in the country. Other states have also seen eye-popping pump prices. Take Delhi Delhi. At the base price of ₹At Rs 31.82 per liter, the center levies excise duty and cess ₹32.90 and the state imposes VAT (even on the dealer’s deduction) ₹20.61. This raises the above average retail price ₹89, including dealer slice ₹3.68. This burden is the legacy of the fuel tax hike half a decade ago, after American shale oil production became a sham and global crude prices fell sharply. The idea came to increase Indian boxes. But a habit caught up. Last March, and then in May, as Kovid reduced our oil import bill, the Center imposed an additional surcharge and cess. ₹13 per liter on petrol and ₹16 on diesel. However, now that the oil has risen again, it has not withdrawn these. A reluctance to reduce taxes on these products is explained by the poor structure of our national economy. The center’s fiscal deficit has expanded understandably through Kovid contingencies. But we must not permanently surpass energy consumers. Let’s go for flexibility and efficiency. Apply GST instead.