States to meet and discuss fuel taxation

With local levies adding up to the auto fuel bill, the Centre has called a meeting of states to impress upon them on the need of uniform taxation policy to benefit consumers. The meeting has been called in two tranches -- on July 30 and August 5.

Petroleum products are subject to multiple taxation. Besides, central excise and customs duties, state governments impose sales tax on petroleum products non-uniformly. Added to that is octroi and entry tax. All this together makes petroleum products costlier for consumers.

Retail end

Due to this tax differential, one litre of diesel in Delhi costs Rs 57.84. At the dealer end, diesel in Delhi costs only Rs 46.41 a litre, excluding excise duty and VAT. But at the retail end, excise duty of Rs 3.56 a litre, dealer commission of Rs 1.19 a litre, VAT at the rate 12.50 per cent is added up making the fuel cost Rs 57.84 a litre. In Mumbai it costs Rs 66.01 because of variation in local taxes or VAT. Prices in every state differ because of the differential in local taxes.

The same problem arises in petrol prices too even as petrol is being sold at market price. To discuss the state taxation issues, the petroleum ministry officials will meet representatives from  six states -- Assam, Bihar, Haryana, Karnataka, Uttarakhand and Kerala on July 30 and 31 while a  similar meeting with officials from Maharashtra, Madhya Pradesh, Rajasthan, Tamil Nadu, West Bengal and Uttar Pradesh will be held on August 5 and 6, a official from petroleum ministry said.

“Our experience has showed that states with these levies have seen sales volumes shift to neighbouring state with no or lower rate of taxes,” the official said.

If states do away with these levies, price of petrol and diesel in those places will fall, benefiting local population.

“The new government is of the belief that consumer interest is supreme and policies should be woven around them. States often see levy of taxes on petroleum products as a short-cut to filling revenue gap but if the volumes shift to neighbouring states, then they are the ultimate loser,” he said.