Deora pushes for specific

Petroleum minister Murli Deora has asked the state govts to lower VAT that they levy on petrol and diesel.

Petroleum minister Murli Deora has asked the state governments to lower and rationalise the value added tax VAT that they levy on petrol and diesel as a percentage of the retail price.

States level VAT on a litre of petrol and diesel,which are in some cases as high as 33 per cent and 24.7 per cent of the retail prices,respectively. This causes an automatic rise in state taxes whenever the Centre raises the prices of these products to salvage state-owned fuel refiners IOC,BPCL and HPCL from the rising global crude oil prices.

This amplifies the consumer impact of the Centres decision to increase the price of petrol and diesel,which indirectly benefits state governments. It also restricts the Centres ability to increase the price of the subsidised fuel whenever a price increase becomes necessary due to the countrys dependence on costly,imported crude oil. India imports nearly 70 per cent of its crude requirement.

Deora also urged the chief ministers of state governments to move away from ad valorem tax rates as a percentage of the price to specific duty in rupee terms per litre,the way the Centre has already done. This is essential to avoid a cascading effect of a fuel price increase on the consumer.

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,a petroleum ministry statement said quoting Deora.

A rise in the international oil price exerts an upward pressure on domestic prices of petroleum products8230;Ad valorem rates of VAT imposed by the state governments further aggravates the impact of international oil prices on the consumer,the statement quoted the minister. He also said the current high levels of state taxes on fuel is unsustainable considering the governments obligation to protect the poor from the rising prices.