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Centre wants states to cut local taxes on diesel, calls meeting

With state-specific levies adding up to Rs. 7 a litre in price of diesel, the Centre has called a meeting with 12 states with the highest incidence of taxes like octroi and entry tax, to impress upon them to cut these duties and bring down prices.

A litre of diesel in Delhi costs Rs. 57.84 while in Mumbai, it costs Rs. 66.01 and in rest of Maharashtra Rs. 65.99. This difference is primarily because of higher local sales tax or VAT and levy of state-specific taxes like octroi and entry tax on the fuel.

Carrying Prime Minister Narendra Modi's governance model of federal cooperativism where states are equal partners with the Centre, the Petroleum Ministry, on instructions from Oil Minister Dharmendra Pradhan, has initiated the consultation process with the states, a top official said.

The ministry on 9 July wrote to the state governments on the issue and has now called a meeting with the states to impress upon them on the need for a uniform taxation policy and doing away with state specific multiple levies, he said.

A meeting has been called with concerned officials from six states of Assam, Bihar, Haryana, Karnataka, Uttarakhand and Kerala on 30-31 July. A similar meeting with officials from Maharashtra, Madhya Pradesh, Rajasthan, Tamil Nadu, West Bengal and Uttar Pradesh has been scheduled for 5-6 August.

‘State specific levies add up in the price of petrol and diesel and this is borne by the consumers. For example, in some cities of Maharashtra, state specific multiple levies add between Rs. 4 and 7 in the price of diesel,’ he said. Diesel in West Bengal costs Rs. 62.64 while the same is priced at Rs. 61.70 in Tamil Nadu. In Madhya Pradesh it costs Rs. 63.94, Rs. 62.21 in Uttarakhand, Rs. 63.25 in Uttar Pradesh, Rs. 62.85 in Karnataka and Rs. 63.04 in Andhra Pradesh. Similarly, petrol in Delhi costs Rs. 73.54 while in Mumbai, it costs Rs. 81.68 and the rest of Maharashtra Rs. 82.16.

‘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.
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