Fixed duty rates on petro products likely

“A final decision will be taken on the basis of Central Board of Excise and Customs (CBEC) analysis of indirect-tax collection situation up to December in the current financial year,” said the official.

At present, central excise duty rates on petroleum products vary from 14 per cent (for high speed diesel) to 30 per cent (for petrol). Petrol and diesel also attract cess/surcharge. The duty rate for other petroleum products is 16 per cent.

After the dismantling of administered price mechanism (APM) in April 2002, oil companies have started revising these product prices periodically, taking into account fluctuations in international oil market.

The Kelkar panel in its report has pointed out that, “Such periodical price revisions make administration of ad-valorem levy difficult.”

The panel has stressed that replacing ad-valorem levy by specific duties would ensure certainty in the duty, which the refineries would have to pay.

“This would facilitate assessment and would also be administratively convenient. The need for ascertaining the market cost, inland freight, margin etc would also be obviated,” it said.

As cess/surcharge on these items are already levied through specific rates, it will be convenient if the Central Value Added Tax (Cenvat) component is also converted into specific rates. Keeping in mind the importance of the petroleum sector to the revenue, the panel has recommended that there should be a quarterly review of specific duties after joint discussions between the revenue department and petroleum ministry so that duty rates can be adjusted to take account of fluctuation of prices in the prevailing quarter.

The finance ministry official, however, pointed out that the revenue department is apprehensive of a revenue loss due to the shift to specific rates as it would be difficult to promptly revise rates.

He added that a 25-30 per cent increase in excise duty collection from the petroleum sector has been witnessed in the current financial year due to rising international crude oil prices.

“This will certainly have a bearing on any decision on the issue as the government will try to ensure that there is no major revenue loss on this account,” said the official.