Diesel price hike a boon for state govt, tax cut unlikely | lucknow | Hindustan Times
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Diesel price hike a boon for state govt, tax cut unlikely

Despite the political brouhaha over a steep hike in diesel prices, the Samajwadi Party (SP) government is unlikely to slash the tax on diesel in the state as the increase in its prices will fetch an additional revenue of R50-60 crore every month to the government that is desperately looking for resources to fund its populist schemes, sources say.

lucknow Updated: Sep 18, 2012 12:03 IST
HT Correspondent

Despite the political brouhaha over a steep hike in diesel prices, the Samajwadi Party (SP) government is unlikely to slash the tax on diesel in the state as the increase in its prices will fetch an additional revenue of R50-60 crore every month to the government that is desperately looking for resources to fund its populist schemes, sources say.

Perhaps that is why, the government has not given any indication of decreasing the tax to neutralise the diesel price hike even though the ruling party plans to stage demonstrations against the United Progressive Alliance (UPA) government on September 20.

At present, 17.23% tax is charged per Rs 100 of diesel in the state. With the hike, the government is getting 82 paise more as tax on the sale of one litre of diesel. Going by the fact that around 6 lakh kilolitre diesel is sold every month in the state, the government coffers are all set to be fatter. “The diesel price hike will bring handsome revenue to the exchequer automatically and the government of the day would not like to compromise on that,” the sources add. They say the diesel price hike will drive up inflation and this, in turn, will further help the government to earn more revenue as VAT is based on the sale price of a commodity. (Thus the higher the price, the higher the revenue mopped up by the state).

When in opposition, the SP used to demand a cut in the state taxes on diesel and petrol and had even promised to do so in its manifesto before the assembly polls.
In June 2009, the Mayawati government reduced the state’s taxes on diesel from 21% to 16.16% to neutralise the diesel price hike effected by the centre then. Later, it marginally increased the tax to 17.23 %, which continues to be in force till date.

“Barring one or two states, including Delhi, the tax on diesel in UP is already lower than that in other states, so there is no scope for further cuts,” says another official.