CMs asked to cut sales tax | delhi | Hindustan Times
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CMs asked to cut sales tax

In what could bring down consumer prices of petrol and diesel by up to Re 1 a litre, Petroleum Minister Murli Deora has asked all chief ministers to consider reducing sales tax rates on them. Anupama Airy reports.

delhi Updated: Jul 03, 2009 01:53 IST
Anupama Airy

In what could bring down consumer prices of petrol and diesel by up to Re 1 a litre, Petroleum Minister Murli Deora has asked all chief ministers to consider reducing sales tax rates on them.

Current VAT (value added tax) rates applicable on petrol and diesel in states range anywhere between 10 and 33 per cent and depending on the level of reduction of taxes by states, prices could be reduced by up to Re 1 a litre on petrol and 50 paise a litre on diesel.

The impact of sales tax levied on petrol and diesel can be seen from the fact that out of the Rs 4 per litre increase in petrol price, only Rs 3.33 per litre goes into the kitty of the oil companies while the rest goes as sales tax to the state governments.

Similarly, against the retail price increase of Rs 2 per litre in diesel, oil firms would get only Rs.1.78/litre and the balance would go to the states.

States levying higher sales tax like Andhra, Tamil Nadu, West Bengal, Maharashtra, MP, Rajasthan and Kerala can easily rationalise taxes to pass on the benefit to consumers.

Deora told HT that he on June 23 wrote to all CMs, asking them to consider reducing taxes on petrol and diesel, especially in the wake of rising international oil prices, so that the impact of high crude prices on the consuming public can be capped.

A similar communication, he said, was sent to the West Bengal finance minister, who is also chairman of the Empowered Committee of State Finance Ministers.