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Cut in fuel prices may cause revenue loss to Punjab

PTI 01 Nov 2014, 18:11:27 PM IST

Chandigarh: The reduction in prices of petrol and diesel may have brought cheers to consumers, but the cut is likely to cause tax revenue loss of up to Rs 35 crore to the state exchequer in Punjab.

“It is estimated that there will be an effect of Rs 30-35 crore on tax collections from petrol and diesel because of price cut in fuel rates. Of which, revenue from diesel alone could be foregone in the range of Rs 20-25 crore,” said an official of Punjab and Excise and Taxation department here today.

With Punjab levies tax on petroleum items as per ‘ad valorem' method, any increase or decrease in prices of fuel cause affect in tax mobilisation to the state kitty.

As per ‘ad valorem' method, the tax is charged as per value of goods or services.

Petrol and diesel prices were yesterday cut by Rs 2.41 a litre and Rs 2.25 per litre respectively on the back of falling international oil rates.

After the cut, petrol and diesel prices in Punjab went down to Rs 71.65 and Rs 52.87 per litre respectively.

Punjab levies value added tax (VAT) at a rate of 9.75 per cent and 28 per cent on diesel and petrol respectively.

Moreover, the state government also levies 10 per cent surcharge on VAT rates.

Punjab annually collects about Rs 2,100 crore of tax from petrol and diesel.

Notably, the SAD-BJP led state government had raised VAT on diesel by one per cent from October 1, which led to increase in retail diesel prices by 55 paise a litre, drawing sharp reaction from several quarters including political parties for increasing tax.

Meanwhile, UT Chandigarh administration has decided not to reduce VAT on diesel from November 1, saying that the Punjab government might raise tax on fuel.

Union Territory Chandigarh had earlier announced to cut VAT on diesel from November 1 in order to bring parity with the tax rate in Punjab.

“We were told by senior officials of Punjab Excise and Taxation department in a meeting held last week that we should hold on reduction in VAT as Punjab is planning to increase VAT on diesel,” UT Chandigarh Finance Secretary Sarvjit Singh said today.

“We will wait for 2-4 days and if Punjab did not increase VAT, then we will reduce VAT on diesel,” he said.

At present, VAT on diesel in Chandigarh is 12.50 per cent as compared to 9.75 per cent in Punjab.

Because of higher VAT in Chandigarh, the diesel is costlier here than that of Punjab.

However, Punjab Chief Parliamentary Secretary (Excise and Taxation), Sarup Chand Singla feigned ignorance over any plans about raising VAT on diesel in the state.

“I have no knowledge about any plans about increasing tax on diesel in the state,” he said.