As pressure mounts, CM to take up fuel tax cut today

Ruchika M Khanna

Tribune News Service

Chandigarh, October 4

As the Centre and various BJP-ruled states, including neighbouring Haryana, slashed taxes on retail fuel, pressure has mounted on the state government to reduce value-added tax (VAT) on petrol and diesel.

Chief Minister Capt Amarinder Singh has convened an emergency meeting of the Excise and Taxation Department and the Finance Department on Friday to decide on relief to be given to the common man by slashing tax on these fuels. While Haryana reduced the VAT on petrol and diesel tonight, bringing the price of petrol to Rs 79 and diesel to Rs 71 per litre, the state may not be able to give a similar relief, though some cut in taxes are now imminent.

Official sources told The Tribune that the government was looking at higher cut in VAT on diesel – which was consumed much more in the state — while VAT cut on petrol could be less. Another formula being worked out is that the state may freeze the imposition of tax on enhanced rates of fuel. A benchmark rate can be determined and in case of fuel price hike beyond that rate, no tax will be imposed on the hiked rates.

Sources in the Excise and Taxation Department said the state earned an additional Rs 125 crore per annum on every rupee increase in petrol rate, and Rs 375 crore per annum on every Re 1 per litre increase in diesel rate.

The state has the highest rate of VAT on petrol after Maharashtra and Andhra Pradesh. So far, the cash-strapped state’s Finance Department has remained defiant in not imposing any cut in VAT on diesel and petrol. The state earns Rs 6,300 crore as VAT from the sale of these retail fuels. The state government gets Rs 27.85 as tax on every litre of petrol and Rs 10.41 as tax on every litre of diesel sold in the state.

Emergency meeting

Capt Amarinder Singh has convened an emergency meeting of the Excise and Taxation Department and the Finance Department on Friday. While Haryana reduced VAT on petrol and diesel on Thursday night, bringing the price of petrol to Rs 79 and diesel to Rs 71 per litre, the state may not be able to give a similar relief, though some cut in taxes are now imminent.