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Sonia asks CMs to reduce sales tax on fuel
June, 06th 2008

Sonia Gandhi has asked party chief ministers to effect a cut in sales tax on petroleum products in a bid to give relief to the common man.

States have pitched in to provide some relief to consumers from the rise in fuel prices. While West Bengal slashed sales tax on petrol and diesel by up to 5%, Bihar, Maharashtra and Kerala will also follow suit soon.

Bihar finance minister and deputy chief minister Sushil K Modi told ET the state government would bring an ordinance soon for the purpose. The state will cut sales tax on petrol from 27% to 24.5% and on diesel from 20% to 18.36%. This will shield consumers from the Rs 5 increase in petrol and Rs 3 in diesel prices. Mr Modi said the state would also examine if sales tax on LPG can be reduced to 3.5%.

Kerala chief minister V S Achuthanandan has said the state would waive the portion of sales tax on increased amount. West Bengal governments decision to slash duty translates into a relief of Rs 2.12 and Rs 1.38 a litre on petrol and diesel, respectively, for motorists in the state. The state cut sales tax on petrol from 25% to 20% and on diesel from 17% to 12.5%.

 Questioning the Centres decision, West Bengal finance minister Asim Dasgupta said: The Centre should reconsider the decision. It is unfortunate that the Union government , while taking the decision to increase the retail price of petrol and diesel, have reduced the excise duty on these items only by Re 1 per litre, while still keeping the rate of excise duty on petrol at least 50% of the basic price.

Mr Dasgupta, who is also chairman of the empowered committee of state finance ministers on valueadded tax (VAT), said state finance ministers would meet soon to find out ways to provide some relief to consumers. He said West Bengals total revenue from sales tax and VAT amount to Rs 9,000 crore, Of this, revenue generated from petroleum goods is around Rs 2,000 crore. After the slash in rates, the state government will incur a loss of Rs 500 crore.

States get about Rs 60,000 crore from taxes on fuel, which is a third of their total revenues. However, the sales tax contribute substantially to the retail sale price of both petrol and diesel. The current agreed floor rate for petroleum products is 20%. But, the rate of sales tax in most states is much higher than 20%. The Centre wanted states to do their bit as a medium-term measure to check fuel price hike. I have appealed to all states to reduce sales tax on petrol and diesel to protect consumers. Their response is positive. Many states are expected to take a decision in this regard soon, petroleum minister Murli Deora said.

The Assam government, on the other hand, has said it will examine if there is a need to reduce VAT on petrol and diesel. The state minister for industries and commerce Pradyut Bordoloi said: We will examine if VAT on petrol and diesel can be lowered. Jharkhand government also refrained from taking a decision immediately.

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