Petrol, Diesel, and Alcohol to Stay Outside GST: Finance Minister Nirmala Sitharaman

In a recent interview with Network18, Union Finance Minister Nirmala Sitharaman clarified that petrol, diesel, and alcoholic beverages will continue to remain outside the Goods and Services Tax (GST) regime. When asked about their potential inclusion in the GST framework, she emphasized, “Not in the immediate future,” signaling that these key commodities will continue to be taxed separately for the foreseeable period.

When the goods and services tax (GST) was rolled out in July 2017, items like petrol, diesel, and alcoholic beverages were kept outside its ambit | News18

Historical Context and Fiscal Significance

Since the implementation of GST in July 2017, petrol, diesel, and alcohol have remained outside the purview of this indirect tax system. The rationale is primarily fiscal. Both central and state governments rely heavily on excise duties and value-added tax (VAT) from these commodities to generate substantial revenue. Integrating them under GST could result in significant revenue losses and compromise the fiscal autonomy of states, making their exclusion a strategic choice.

Simplifying the GST Structure

Despite excluding these commodities, the government has made efforts to streamline the GST system. Sitharaman pointed out that 99% of goods and services under GST are now taxed at either 0%, 5%, or 18%. Only a small fraction, roughly 1%, falls under the category of demerit or sin goods, which includes items such as tobacco, high-end cars, and aerated drinks. This simplification has helped reduce complexity and compliance challenges for businesses.

Currency Volatility and Economic Stability

In the same interview, Sitharaman addressed concerns about the performance of the Indian rupee against the US dollar. She clarified that the rupee is not experiencing a weakening trend but is undergoing normal volatility, a situation mirrored in many other global economies. This reassures markets and investors that the currency fluctuations are part of regular economic dynamics rather than structural weaknesses.

The MGMM Outlook

Finance Minister Nirmala Sitharaman’s recent clarification that petrol, diesel, and alcohol will remain outside the GST framework reflects the government’s careful balancing of fiscal priorities and economic realities. Since GST’s launch in 2017, these commodities have stayed exempt due to their immense contribution to state and central revenues through excise and VAT. Their inclusion under GST could disrupt this balance, leading to significant revenue shortfalls for states and impacting fiscal autonomy. By keeping them outside the GST net, the government ensures that critical revenue streams are preserved while it continues simplifying taxation in other sectors.

At the same time, the government’s efforts to streamline GST into clearer tax slabs highlight its commitment to reducing complexity for businesses and ensuring smoother compliance. With 99% of goods and services falling under 0%, 5%, or 18% tax rates, the system has become more predictable, supporting both growth and transparency. Sitharaman’s reassurance about the rupee’s stability further signals that India’s economic fundamentals remain strong despite global currency fluctuations. This dual approach—fiscal prudence combined with systemic simplification—underscores India’s broader economic strategy of stability, revenue protection, and investor confidence.

(Sources: Moneycontrol, News18, Business Today)