Why BJP Excludes Petroleum and Alcohol from GST Ambit: Explained

The Goods and Services Tax (GST) was introduced in India in 2017 by the Bharatiya Janata Party (BJP) government as a comprehensive indirect tax on the manufacture, sale, and consumption of goods and services throughout the country. However, two significant commodities, petroleum and alcohol, were excluded from the GST ambit. This exclusion has raised several questions and debates. This article aims to explain the reasons behind this decision by the BJP government.

Understanding the GST Framework

The GST is a destination-based tax, which means it is applied where goods and services are consumed, not where they are produced. It is a multi-stage tax applied at every step of the value chain, from production to consumption. The GST has replaced several indirect taxes, such as excise duty, VAT, and service tax, making the tax system more streamlined and efficient.

Why Exclude Petroleum and Alcohol?

The exclusion of petroleum and alcohol from the GST ambit is primarily due to fiscal considerations. Both these commodities are significant sources of revenue for both the central and state governments. By keeping them out of the GST, the governments retain their autonomy over taxing these commodities, which allows them to maintain a steady revenue stream.

The Role of State Governments

Under the Indian Constitution, state governments have the exclusive power to levy taxes on alcohol. This is a significant source of revenue for many states. Including alcohol in the GST would mean that states would have to share this revenue with the central government, which they are reluctant to do.

The Case of Petroleum

Similarly, petroleum products are a major source of revenue for the central government. The central excise duty on petroleum products is a significant contributor to the central government’s revenue. Including petroleum in the GST would mean a significant loss of revenue for the central government.

The Future of Petroleum and Alcohol in GST

While petroleum and alcohol are currently excluded from the GST, there is ongoing debate about whether they should be included in the future. Proponents argue that including these commodities in the GST would make the tax system more comprehensive and efficient. However, opponents point out that this would lead to a significant loss of revenue for both the central and state governments.

In conclusion, the exclusion of petroleum and alcohol from the GST ambit by the BJP government is primarily a fiscal decision, aimed at preserving revenue streams for both the central and state governments. However, this decision is not set in stone and may change in the future depending on the economic and political landscape of the country.