Impact of Fuel Cess on Consumer Purchasing Power

The cess on petroleum products paid by a manufacturing company to the transporter of input goods becomes part of the cost of sales, as it cannot be claimed as Input Tax Credit (ITC). This cess is further added with other costs, and GST is levied on the total amount. As a result, the final cost of the cess paid to the transporter may increase by up to 150% of the original cess amount. This cascading effect ultimately impacts the consumer's purchasing power". This is how Cess on petroleum products influences price inflation.

Price influence in India significantly impacts the economy by reducing:

1) Consumer purchase power,

2) Increased production costs for business.

3) Disrupting investment decisions

4) Hindering economic growth.

5) Make Indian goods and services more expensive in the global market.

6) Reducing competitiveness.

7) Higher interest rates affect borrowing costs.

8) Currency Depreciation.

9) Weakens the Rupee.

10) Making imports costly

11) Errosion of Public real income

Bringing petroleum products, particularly petrol and diesel, under GST would do away with the cascading impact of taxes and enable players to claim input tax credit, giving relief to companies and consumers.

Let us take a case study!

For every ₹30 lakhs of cess on diesel paid by manufacturers, end consumers end up bearing an additional cost of ₹16.02 lakhs. This places an undue burden on consumers, who are compelled to spend their hard-earned money simply because the cess on petroleum products is not included under the purview of GST.

Consider the entire manufacturing sector in our country-how many times ₹30 lakhs are being paid by manufacturers to transporters, and how many times ₹16.02 lakhs are being passed on to end consumers? The total must amount to several lakhs or even crores of rupees.

If the cess on diesel were brought under the GST regime-say, at 100% of the basic price-and allowed as Input Tax Credit, a significant amount of public money would re-enter circulation. This would boost demand for products, lead to increased production, generate employment, raise the per capita income of Indians, and help control price inflation to a great extent.

This is a sincere appeal to all governments to hear the voice of Indian consumers. Please bring the cess on petroleum products under the ambit of GST and allow it to be claimed as Input Tax Credit. Let us protect the public's hard-earned money by taking necessary and timely action on this issue.

DISCLAIMER

This article aims to raise awareness among consumers about the hidden burden they bear because the CESS on fuel is currently treated as a cost of sales by manufacturers. This practice indirectly increases the price of goods and services.

We appeal to all governments to consider bringing petroleum CESS under the GST framework and allow Input Tax Credit (ITC). This move can ease the financial pressure on manufacturers, lower costs for consumers, and ultimately enhance purchasing power across the economy."

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