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News India Live, Digital Desk: Diesel Price: It is known that new rates of GST have been implemented across the country from today i.e. 22 September 2025. Many things have become cheaper by this and people have got some relief before festivals. At the same time, zero tax will be charged on some items. Under the new ‘GST 2.0’ (GST 2.0) reforms, the government has made major changes in tax structure, which will now apply two rate slabs of 5% and 18% across the country. Common people will get direct benefit of this. Kitchen accessories, personal care products, electronic equipment and medicines have become inexpensive. But, a question is still rotating in the mind that Why petrol and diesel are kept out of the scope of GSTWhen so many everyday things became cheaper, why were these two most important fuels kept away from this list?
Let us know what is the real reason behind this:
Why petrol and diesel are out of GST, these are 3 big reasons
The biggest reason is the issue of revenue for the central and state governments. Governments earn more than Rs 8 lakh crore annually from petroleum products. If petrol and diesel are included in GST, then there will be a big decline in this huge revenue (income) received by the Center and the states. About 25-30% of the total income of the states comes from the tax imposed on them.
- Government’s major source of revenue: Taxing fuel has been the biggest means of earning for the central and state governments. State governments charge value -added tax (VAT) and Central Government Excise Duty. These taxes are more than 50% of the total retail price. If they are also kept in the highest slab (28%) of GST, then the government will still be reduced significantly compared to now. If 28% GST is imposed in Delhi, then petrol can come up to ₹ 70 per liter.
- Protests and financial freedom of states: Many state governments are afraid that their income will decrease with GST. In addition, they do not want to lose their financial autonomy (freedom). They feel that by getting under GST, they will lose the exemption to impose tax according to their needs, as they are able to do through VAT right now. Finance Minister Nirmala Sitharaman has also clearly stated that this decision is to be taken by the states in the GST Council, and the states have not yet agreed to it.
- GST Council consent: It is very important to agree to all the states in the GST Council to include petrol and diesel in GST. Since everyone is afraid of revenue deficit, the consent of all states is currently a big challenge.
How is tax on petrol and diesel now?
Even today, there are mainly two types of taxes on petrol and diesel:
- Central Excise Duty: This central government imposes it.
- State VAT: This is decided by every state according to its needs and prices. This is the reason that there is so much difference in the prices of petrol and diesel in different states of the country. Apart from this, the commission of the dealer is also included in it.
If it is brought to GST, it will replace the existing excise duty and VAT. Experts believe that even if they are kept in the highest slab of 28% of GST, customers will still get petrol and diesel at a lower price, but the governments will have to lose heavy revenue.
CBIC chairman Sanjay Aggarwal has also made it clear that it is not possible to bring petrol and diesel under the GST at the moment, as the central government imposes excise duty on them and this is a very big revenue source of value -added tax (VAT) for the states. Until political consensus is formed, and no model of compensation for revenue deficit is ready, till then these fuels are difficult to get under the purview of GST.