Deora Calls upon State Governments to Cut VAT on Diesel and Petrol

Murli Deora Deora, Minister of Petroleum and natural gas has called upon the State Governments to reduce and rationalize Sales Tax / VAT on Petrol and Diesel. In a letter to the CMs of various State Governments he said that a rise in the international oil prices exerts an upward pressure on domestic prices of petroleum products. “Ad valorem rates of VAT imposed by the State Governments further aggravates the impact of international oil prices on the consumer,” Mr. Deora added.

The Minister underscored the commitment of the Central Government to ensuring supply of essential fuels to the common man at affordable rates. “To achieve this objective, the Central Government has provided financial assistance of Rs.26,000 crore to the public sector OMCs, while the upstream oil PSUs have contributed Rs.14,430 crore towards under-recoveries of Oil Marketing Companies (OMCs) during 2009-10.,” Mr. Deora said.

Enclosing a statement of VAT rates in different States, the Minister pointed out that the VAT rates are very high in most of the States, and need to be reduced. In some of the States, the VAT on Petrol and Diesel is as high as 33% and 24.7% respectively. Further, he said, in the current taxation structure, VAT is levied by the State Governments on an ad valorem basis, i.e., as a percentage of the price of the product. This means that when oil prices are high, the taxation on the products is higher, rendering the product even more expensive. At a time of rising prices, ad valorem taxes have a cascading impact on the retail price of petroleum products. “To address this issue, the ad valorem component of the VAT can be converted into a specific component, at the current levels,” Mr Deora suggested.

The Minister informed that the Central Government has already done away with the ad valorem component of Excise Duty on Petrol and Diesel, and the Excise Duty has been made specific. It is desirable that the State Governments also undertake similar tax rationalization on Petrol and Diesel. “Also, some of the States are levying high VAT rates on a product like PDS Kerosene, which needs to be looked into in view of its usage in lighting and cooking purposes by the common man,” he emphasized.

VAT/ Sales Tax Rates on Petroleum Products
SI.No.	State	MS	HSD	SKO (PDS)
1	Andhra Pradesh	33.00%	22.25%	4.00%
2	Assam	27.50%	16.50%	5.00%
3	Bihar	24.50%	18.36%	12.50%
4	Chandigarh	20%+ Rs.10/KL	12.50%+ Rs.101KL	4.00%
5	Chattisgarh	25.00%	25.00%	4.00%
6	Delhi	20.00%	20%+Cess Rs.250/KL	5.00%
7	Goa	22.00%	20.00%	4.00%
8	Gujarat	23%+ 2% Cess	21%+ 3% Cess	NIL
9	Haryana	20%+5% Addl. Tax	8.8%+5% Addl. Tax	5%+5% Addl. Tax
10	Himachal Pradesh	25.00%	14.00%	NIL
11	Jammu & Kashmir	20%+ Rs.3/Ltr	12%+ Re. 1/Ltr	5.00%
12	Jharkand	20.00%	18.00%	4.00%
13	Kerala	29.01%+ Cess 1 %	24.69%+ Cess 1%	4%+ Cess 1%
14	Karnataka	25%+5% Entry Tax	18%+5% Entry Tax	5.00%
15	Madhya Pradesh	28.75%+1% Entry tax	23%+l% Entry tax	5.00%
16	Maharashtra	25%+Re.1/Ltr	23.00%	5.00%
17	Orissa	18%+1% Entry Tax	18%+1% Entry Tax	4%+1% Entry Tax
18	Pondicherry	15.00%	14.00%	NIL
19	Punjab	27.5%+10% Addl. Tax + Cess Re. 1/Ltr	8.8%+10% Addl. Tax	5%+10% Addl. Tax
20	Rajasthan	28%+ Cess Rs.0.50/Ltr	18%+ Cess Rs.0.50/Ltr	5.00%
21	Tamil Nadu	30.00%	21.43%	4.00%
22	Uttar Pradesh	26.55%	17.23%	4%+l% Addl. Tax
23	Uttarakhand	25.00%	21.00%	4%+0.5% Addl. Tax
24	West Bengal	25%+ Re. 1/Ltr	17%+Rs.1/Ltr (-) Rs.0.29/ Ltr	4.00%

[Source: PIB Press Release dated 21 June 2010]