The Hindu Business Line : States ask Centre to make good the loss on fuel levy cuts

New Delhi, June 16 States are now pitching for compensation on the unilateral duty cuts on petrol, crude and diesel effected by the Centre early this month to provide relief to the oil marketing companies.

The cuts, according to them, would impact their shareable revenues from the Centre’s tax kitty.

Alongside, there is a chorus of demand for compensating the 10 States that had cut sales tax on petrol and the 15 States that reduced sales tax on diesel since June 5, owing to the “unusual situation” on the petroleum product pricing front. On June 5, the Centre announced price revision in petroleum products and made duty changes, which placed the revenue foregone estimate at Rs 22,260 crore for the remaining 10 months of the fiscal.

The VAT panel today said that States would lose nearly 30 per cent of this amount in the form of reduced Central tax devolutions and hence the demand for compensation.

“We urge the Central Government to bear at least 50 per cent of the revenues already lost by the States’ decisions and announcements at the national level, which would be at least Rs 8,000 crore during the remaining months of the current fiscal”, Dr Asim Dasgupta, Chairman of the Empowered Committee of State Finance Ministers on VAT, told presspersons after a meeting on petro-product pricing here today.

Dr Dasgupta said that the panel would now ask the Centre to provide details of the policy on price fixation for petroleum products in the country. “We would like to know why basic price of petroleum products vary in different States. We would like the basic price of petroleum products to be uniform across States”, he said.

He also said that the panel was not looking at requesting any State to reduce further or increase the sales tax on petrol and diesel. He said there was no plan to bring petroleum products under the VAT regime. Also, there would be no change to the uniform floor rate of 20 per cent set for sales tax on petrol, diesel and other petroleum products, despite recent deviations on account of the “difficult times”.

One month from now, State Finance Ministers are planning to meet to discuss Centre-State relations and convey their views to the Centre and the 13th Finance Commission.

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