The Hindu Business Line : States against plan to list LPG in `declared goods'

Upset over the Centre's move to curtail the power of the States to levy value-added tax (VAT) on LPG (domestic), a number of States are keen that the Central Sales Tax (CST) Act be amended to ensure that the Centre does not have any powers to restrict or limit their right to levy local taxes.

Moreover, State Finance Ministers, under the aegis of the VAT Panel, are also demanding full Central compensation of the revenue loss that would be suffered by the States on account of the Budget proposal to include LPG in the list of `declared goods' under the CST Act.

By including LPG in the `declared goods' list, the States cannot levy a VAT/sales tax rate of over 4 per cent on this product. Currently, LPG is under VAT at 12.5 per cent. On average, non-VAT states are levying sales tax of 12 per cent, although the uniform floor rate is 8 per cent.

"The Budget proposal would be good for consumers, but States would lose revenues. All the State Finance Ministers who attended today's meeting demanded 100 per cent compensation from the Centre for loss of revenues from this move. I think it is only fair that they be fully compensated," Dr Asim Dasgupta, Chairman, Empowered Committee of State Finance Ministers on VAT, said after a meeting of the VAT Panel here today. In his Budget speech, the Finance Minister, Mr P. Chidambaram, said that the States are taxing LPG at high rates and that they should bear a portion of the burden of high prices of petroleum products. In order to moderate the price of LPG, the Finance Bill 2006 proposed inclusion of LPG in the list of `declared goods'.