Consumers still coughing up more per cylinder
EVEN AFTER the State Government slashed Trade Tax from 11 per cent to 4 per cent after Parliament put domestic LPG on the list of ?declared goods? in April this year, the prices of domestic LPG cylinders have not come down. Tax experts feel cylinder prices in the retail market should have gone down by at least Rs 18-20 per cylinder following tax cut.india Updated: Dec 12, 2006 01:43 IST
EVEN AFTER the State Government slashed Trade Tax from 11 per cent to 4 per cent after Parliament put domestic LPG on the list of ?declared goods? in April this year, the prices of domestic LPG cylinders have not come down. Tax experts feel cylinder prices in the retail market should have gone down by at least Rs 18-20 per cylinder following tax cut. While the State Government is getting poorer by over Rs 10 crore every month due to the tax cut, the oil companies are not passing on the benefit to the consumers. Domestic LPG was included in the ?declared goods? category through an amendment to the Central Sales Tax (CST). The amendment came into effect following the Presidential assent on April 19, 2006. This automatically restricted trade tax on domestic LPG to 4 per cent in both VAT and non-VAT states. But, contrary to what was expected, the prices of domestic LPG have not fallen despite the 7 per cent reduction in tax. The LPG price in Lucknow for example is Rs 295 per cylinder. This includes Rs 29.50 as Trade Tax payable at the rate of 10 per cent and Rs 2.95 as Development Tax being charged at the rate of 1 per cent, the total tax burden being 11 per cent or Rs 32.45. Thus, the actual cost of one cylinder is only Rs 263.45! Since, the State Government abolished 1 per cent Development Tax on the domestic LPG and also slashed 6 per cent Trade Tax to limit the total tax to 4 per cent as the State cannot levy more than 4 per cent tax once Parliament included any item in the list of ?declared goods,? the consumers should have got a relief of Rs 20.65 per cylinder, each cylinder costing only Rs 274.35. After all, the Trade Tax is imposed on the total cost of a commodity, argued a senior Trade Tax official. The Petroleum Minister had remarked that gains made from the tax reduction would be used by the oil firms to make up for the part of losses they suffered due to selling subsidised LPG below the production cost. ?But tax is something that belongs to the public. It is they who have to face burden when a new tax is imposed or the existing tax increased. And, when the State Government had reduced Trade Tax on LPG, it is the consumers who must be benefited from it,? argued a trade tax expert and former member of Trade Tax Tribunal, Keshav Dayal. He said neither the Centre nor the oil companies could be allowed to sit over the taxpayers? money. ?The LPG cylinder?s cost could have remained unchanged only when the Centre had issued any notification increasing LPG prices accordingly after the fuel was put on ?declared goods category,? he said. Principal Secretary (Tax and Registration) admitted that the Government was losing Rs 10-12 crore revenue every month on account of reduction in tax. But he did not comment on price part. ?Prices are determined by the Centre,? he clarified. Indian Oil Company (IOC) GM (UP), Sharat Meshram also said that it was for the Centre to decide on prices. ?We are paying Trade Tax on domestic LPG at the rate of 4 per cent ever since it was included in ?declared goods, but we cannot comment on prices,? he told the HT. While delivering his Budget speech in February, Union Finance Minister P Chidambram had remarked: ?It has become imperative to moderate the prices of LPG for domestic use. The states are taxing domestic LPG at high rates. They should also bear a portion of the burden of high prices of LPG (domestic). I propose to include LPG domestic in the list of ?declared goods? under the CST Act.? But where is the price moderation? And, who is the real beneficiary of the Centre?s subsidises?the LPG consumers or, the oil companies that supply the fuel?