The Union and state levies contribute to a significant part of the retail prices of petrol and diesel in India. Examine the reasons for such heavy taxation of these products and how their inclusion in GST would affect government revenues? 10 marks

Mentor’s comment-

  • In the intro, mention the issue of rising fuel prices and demand for its reduction.
  • In the body, mention the reasons for their heavy taxation discourage consumption, reduce impact on the environment, garner revenue to fund infrastructure etc. In the implications mention the issue of heavy dependence of states and the Centre on the revenue garnered from the fuels and how inclusion in GST with highest tax bracket of 28 per cent could result in a total loss of 5.5 lakh crores.
  • Conclude by mentioning the need for reducing the government’s dependence on the revenue from the tax on these fuels.
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