Uniform diesel price looks to become a reality in north India. The key functionaries of Himachal Pradesh, Punjab, Haryana and Delhi will give a final push to the ambitious move on Tuesday in Delhi by fixing the deadline to implement uniform Value Added Tax (VAT) on diesel.
VAT is a major source of revenue for states and due to different tax rates, the market shifts from one state to another, causing revenue loss. During a meeting in Delhi on May 21, finance ministers of these four states had agreed on uniform VAT on all goods, especially goods in which trade diversion takes place.
To give a final push for uniformity in tax rates, excise and taxation officials of all four states will meet in Delhi on Tuesday to fix the date for implementing the uniform tax regime, sources said.
Punjab had been nudging Haryana as well as the Chandigarh administration for bringing uniformity in VAT on diesel. The recent `1 infrastructure development cess on diesel by the Punjab government has adversely affected its revenue collection due to massive pilferage. Also, residents of areas bordering Haryana prefer going there for cheap diesel. VAT plus surcharge and cess on diesel in Punjab is 14.5%.
After the Delhi meeting, the Himachal Pradesh cabinet increased VAT on diesel by 16% with a condition that the hill state will implement it only after other states take necessary steps in this direction. The Delhi assembly has passed the Delhi Value Added Tax (amendment) Bill which will allow the state government to regulate VAT on petroleum products. The Punjab cabinet has authorised deputy chief minister Sukhbir Singh Badal, who also holds the excise and taxation portfolio, to initiate steps in this direction, said sources.
Another objective of Tuesday's meeting, sources say, is to remove trust deficit, if any. The obvious worry of one state is that will its neighbouring state implement the decision? That's why a date will be fixed to implement the uniform tax regime regarding diesel, said sources.
According to the approved minutes of the May 21 meeting, which Punjab received on June 22, states had agreed for uniformity in VAT on all goods, especially the goods in which trade diversion takes place with minimum difference in the sale price. "The need to maintain uniformity in tax rates in order to avoid trade shift as well the misuse of statutory forms was agreed by all," reads the minutes of the meeting.
To begin with, the states have decided to bring tax uniformity on diesel, followed by petrol, tobacco products, timber, furniture items, automobiles, electronic goods and electric appliances.
However, Himachal finance minister had pointed out that the tax rate on certain goods such as diesel in the hill state might be maintained slightly below - say by 1% - the rates applicable in other states as the landing cost of goods is comparatively higher in Himachal.
To achieve the objectives set by the finance ministers, a committee of officials of the finance and taxation departments had been set up. The ministers had also agreed that the decision of the committee should be implemented in a time-bound manner and commissioner, excise and taxation, Punjab, was tasked to coordinate the meeting of officials. The committee will also co-opt finance secretaries and commissioners of taxation of Jammu and Kashmir, Uttarakhand, Uttar Pradesh and Rajasthan.
At the Tuesday's meeting, representatives from oil marketing companies will also be called to clarify the mechanism for fixing state-wise landing cost of fuel.