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Old 9th November 2021, 13:02   #1
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Default Why Petrol & Diesel are excluded from GST? Kerala HC to GST Council

In yet another case of judicial activism, which is increasingly becoming a trend, the Kerala HC has asked the GST Council to file a response within 10 days, as to why Petrol and Diesel have not been included in the ambit of GST yet. The question, though genuine, does not warrant courts to intervene in what is essentially a matter entirely for the Govt to decide; in this case, the GST Council which comprises the Union Finance Minister alongwith the Finance Ministers of all states.

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The Kerala High Court on Monday directed the GST council to explain why petrol and diesel were not included within the ambit of Goods and Services Tax (GST).

A Division Bench comprising Chief Justice S. Manikumar and Justice Shaji P Chaly asked the GST council to file a statement in this regard within ten days. The Court was adjudicating upon a petition filed by Kerala Pradesh Gandhi Darshanvedhi challenging the decision of the GST council.The petitioner, represented by Advocate Arun Varghese, stated that due to different rates of tax levied by the State governments under their fragment taxing policies, currently petrol and diesel were charged differently across the country. According to the petitioner, this was an impediment in the way of achieving a harmonized national market as contemplated under Article 279 of the Constitution. The petitioner also contended that due to an increase in the prices of petrol and diesel, there has been a hike in fares of vehicles causing a lot of problems for the common man. He argued that this situation will further lead to a price hike in essential commodities, thereby creating a high increase in the cost of living.

'The unprecedented hike in the price of petrol and diesel pushes the public into immense hardship by which their right to life guaranteed under Article 21 of the Constitution is violated', the plea reads. The Court entertained the petition and sought reasons for the GST Council not acting upon the same.
https://www.google.com/amp/s/www.liv...h-court-185106
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Old 9th November 2021, 14:12   #2
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Default re: Why Petrol & Diesel are excluded from GST? Kerala HC to GST Council

I appreciate the intent of the court, but the three pillars of democracy i.e. Legislative, Executive, and Judiciary should work independently for an effective society.

They can overstep into each other areas only in case of emergencies or grave concerns.
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Old 9th November 2021, 14:42   #3
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Default re: Why Petrol & Diesel are excluded from GST? Kerala HC to GST Council

This seems to be a PIL. I personally don't see this as judicial activism. Given the amount of price fluctuation we have seen during and after the pandemic, it has made life difficult for many. On one hand the Govt says prices are inline with international crude cost. We all know during the pandemic by how much excise duties were increased to offset the drop in crude price. Now that crude is back to its old prices, the govt has not reduced taxes until recently (in the guise of Diwali gift) or whatever it is.

Fuel is an essential commodity and I think it should immediately be brought under GST. It is inline with the GST goal of One nation one tax.
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Old 9th November 2021, 14:44   #4
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Default re: Why Petrol & Diesel are excluded from GST? Kerala HC to GST Council

When GST was introduced in 2017, Arun Jaitley had tried hard to bring petroleum and alcohol products under GST. The Non-NDA governments did not accept it. Loss of revenue was stated as the reason. Hopefully, this question by Kerala HC will give it the required push.
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Old 9th November 2021, 15:38   #5
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Default re: Why Petrol & Diesel are excluded from GST? Kerala HC to GST Council

In addition to what Condor has informed :
One can refer to MOM Of the last GST few council meets. Where Non-NDA governments have denied (Voted against) to allow Petroleum to be included in GST, even with proposed new slot of 36% GST.
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Old 10th November 2021, 01:09   #6
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Default re: Why Petrol & Diesel are excluded from GST? Kerala HC to GST Council

Judging by the current political atmosphere in the country, doubt whether the non-NDA state governments will agree to fuel being brought under GST anytime soon. The last few GST Council meets have been quite stormy from what reports suggest. If the Central government is serious about introducing a new GST slab for fuel, it should use it's total majority in Parliament for once and push this through. Anything in India can happen with the right amount of political will. Maybe the government is waiting for the upcoming state elections to come a little closer!

Last edited by IamNikhil : 10th November 2021 at 01:10. Reason: Typo
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Old 10th November 2021, 06:11   #7
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Default re: Why Petrol & Diesel are excluded from GST? Kerala HC to GST Council

GST Council will give a flimsy reply & carve out it's discretion in the matter, and sideline any idea that the HC may have about its jurisdiction to pass any order about the same. Judges off-record comments/rants mean nothing to the Govt.

Last edited by WorkingGuru : 10th November 2021 at 06:19.
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Old 10th November 2021, 07:30   #8
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Default re: Why Petrol & Diesel are excluded from GST? Kerala HC to GST Council

From this source...
Quote:
When GST was introduced in July 2017, five commodities—crude oil, natural gas, petrol, diesel and aviation turbine fuel—were excluded from its ambit, since the Centre and states depended heavily on these for their revenues. The general expectation was that if the central and state taxes are replaced by GST, where the highest tax slab is 28 per cent, there would be a substantial reduction in fuel prices
Quote:
Taxes on fuel have been a major source of revenue for central and state governments, which is a key reason why they do not want to bring it under GST. Taxes comprise 55.5 per cent of the retail price of petrol in Delhi and nearly 46 per cent of diesel
Note that, this was Sep 2021...
Quote:
In June this year, the Kerala High Court had directed the GST Council to forward a representation to the Centre to bring petrol and diesel under the GST regime and take an appropriate decision within six weeks. This was following a public interest litigation by the Kerala Pradesh Gandhi Darshanvedi, which prayed that these fuels be included in the GST so “as to achieve a harmonised national market as contemplated under Article 279A(6) of the Constitution of India
Quote:
“The Council had discussed it, and (it) felt that it was not the time to bring the petroleum products into the GST,” she told the media after the council meeting. She also said that “members” were of the view that petroleum products should not be included in the GST, without specifying any particular state. However, media reports have said that Kerala, Tamil Nadu and the BJP-ruled state of Karnataka had vehemently opposed such an inclusion, since it would hamper their revenues
Obviously the below is BS because TN CM already lowered ST a bit due to which we've lowest fuel price in all 5 states in South
Quote:
Kerala’s finance minister K.N. Balagopal said that bringing fuel under GST would not lower the price of fuel and wanted the Centre to lower excise duties first. “The Union government is already collecting Rs 28 for diesel and Rs 26 for petrol as cess. It is a special cess outside the divisive pool. It is not shared with the states. Another Rs 4 is charged for a litre of diesel as agricultural cess. So, if the government wants to reduce the price, the cess has to go,” he said. Earlier, he had said that bringing fuel under GST would result in losses worth Rs 8,000 crore to his state, annually. Since the additional levies are not shared with the state governments, the Centre should reduce those, he said.
Quote:
Better GST collections should offer it some leeway to consider such measures. With the easing of the second wave of Covid-19, and the pace of vaccination picking up (India had administered vaccines to over 810 million people as on September 21), GST collections, which had lagged in some months, are expected to pick up. Recent data already show a rapid improvement in both GST and excise/ cess collections. GST collections at Rs 1.16 lakh crore in July were higher than in both May (Rs 1.02 lakh crore) and June (Rs 92,849 crore). With average daily e-way bills generated in July higher than in June and May, the outlook for collections is significantly brighter, says a recent note from Care Ratings
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Old 10th November 2021, 07:52   #9
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Default re: Why Petrol & Diesel are excluded from GST? Kerala HC to GST Council

Quote:
Originally Posted by IamNikhil View Post
If the Central government is serious about introducing a new GST slab for fuel, it should use it's total majority in Parliament for once and push this through. Anything in India can happen with the right amount of political will. Maybe the government is waiting for the upcoming state elections to come a little closer!
Not quite.

For areas under Central govt jurisdiction, the NDA govt can use it's majority. However, GST comes under concurrent domain, and as per GST framework - ALL states must agree to any changes.

(note - GST has 2 components CGST and SGST. The obvious indicator of concurrent nature of this tax.)
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Old 10th November 2021, 08:35   #10
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Default re: Why Petrol & Diesel are excluded from GST? Kerala HC to GST Council

The population of Kerala is 2.5 percentage of India. But state share of taxes from centre government to Kerala is only 1.94%. Perhaps court should ask this first.
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Why Petrol & Diesel are excluded from GST? Kerala HC to GST Council-img_1_1636512767513.jpg  


Last edited by anb : 10th November 2021 at 08:54.
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Old 10th November 2021, 11:36   #11
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Default Re: Why Petrol & Diesel are excluded from GST? Kerala HC to GST Council

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Originally Posted by anb View Post
The population of Kerala is 2.5 percentage of India. But state share of taxes from centre government to Kerala is only 1.94%. Perhaps court should ask this first.
The devolution to states is not entirely based on population. In the same document, it is mentioned.(link)
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There are more details below the table you mentioned in the later sections.
I am not posting anything more related to this, let's stick to the topic.

Quote:
In yet another case of judicial activism, which is increasingly becoming a trend, the Kerala HC has asked the GST Council to file a response within 10 days, as to why Petrol and Diesel have not been included in the ambit of GST yet.
This is definitely judicial over-reach. But the question is, how does including under GST reduce the fuel price. For instance, look what happened to cars. The prices remained exactly the same. There was some respite to SUVs which was quickly corrected. Government can add any number of cess to bring back to the current numbers. Secondly, if it is question is reducing taxes, both state and central government can do it now, why wait for GST.
Bringing fuel under GST is only a fight between central and state governments to preserve their existing control/share. For a common, nothing is going to change.

Last edited by Meph1st0 : 10th November 2021 at 11:37.
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Old 10th November 2021, 12:02   #12
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Default Re: Why Petrol & Diesel are excluded from GST? Kerala HC to GST Council

As per The Constitution (One Hundred and First Amendment) Act, 2016, in case of a voting, every decision of the GST Council has to be taken by a majority of not less than three-fourths of the weighted votes of the members present.

The vote of the central government has a weightage of one-third of the total votes cast, and the votes of all the state governments taken together have a weightage of two-thirds of the total votes cast in that meeting.

Hence, in order for petrol/diesel to come under GST ambit, atleast 3/4th of weighted votes are required and most of the states are not willing to give away their share of revenue most likely due to Covid related expenses they are incurring since past 1.5 years.
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Old 10th November 2021, 12:04   #13
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Default Re: Why Petrol & Diesel are excluded from GST? Kerala HC to GST Council

Quote:
Originally Posted by condor View Post
Not quite.

For areas under Central govt jurisdiction, the NDA govt can use it's majority. However, GST comes under concurrent domain, and as per GST framework - ALL states must agree to any changes.

(note - GST has 2 components CGST and SGST. The obvious indicator of concurrent nature of this tax.)
Going by that, nothing will ever sail through. There will always be political wrangling. Politics is anyway a game of musical chairs. Sad.
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Old 13th November 2021, 15:41   #14
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Default Re: Why Petrol & Diesel are excluded from GST? Kerala HC to GST Council

In ideal settings, different functional heads of the of the constitution must work separately but I believe it can be safely said to be an utopian ideal. Judicial activism came into picture, because others were not doing their job properly and increasingly so. As courts are not the subject experts of everything under the sky, mistakes are bound to happen but is there a way out presently. Judicial activism is here to stay and will increase with time unless some drastic changes happen in the way, things are moving today.
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