After Karnataka abolished 5% entry tax on petrol and diesel during the roll-out of Goods and Services Tax on July 1, diesel and petrol prices in the State have been the lowest in the South.
Fuel outlets, particularly those near Karnataka’s borders, have been displaying boards to this effect to woo more inter-State vehicles. The difference in prices is due to different rates of Value Added Tax that is levied by different States concerned.
The abolition of entry tax in Karnataka brought down the prices of petrol and diesel by ₹3.37 (from ₹67.61 to ₹64.24) and 2.79 (from ₹57.02 to ₹54.23) respectively in Karnataka from July 1.
Daily increase, rather than revision, of fuel prices has resulted in these products being sold at ₹71.77 and ₹58.97 respectively as on Saturday in Bengaluru.
Spectacular growth
A couple of years ago, the situation was quite the opposite, with prices of petroleum products being the highest in Karnataka, with transport operators crying foul over the higher State tax rates. Diesel sales grew by over 9% with all oil marketing companies (OMCs), government and private as well, selling close to 104 crore kilo litres (KL) post entry tax withdrawal in July and August in Karnataka. The OMCs had sold about 94 crore KL diesel in July-August 2016.
During May-June 2017, the diesel sales growth had just been around 2 to 3%, according to sources in OMCs.
On the other hand, petrol sales witnessed about 6.5% growth with OMCs selling about 47 crore KL in July-August this year as against about 44 crore KL in July-August 2016. Growth in diesel sales is definitely abnormal and can directly be attributed to reduced prices in Karnataka, sources said, adding that trucks and buses which form a major chunk of inter-State operations have contributed to the increase in sales.
State Commercial Taxes Commissioner Ritvik Ranjan Pandey told The Hindu the State will lose about ₹2,000 crore a year following the scrapping of entry tax.
He doubted whether increased volumes of sale would fill the gap. Karnataka State Lorry Owners and Agents’ Federation president G.R. Shanmugappa demanded uniform State taxes across the country for the benefit of freight operators.
Mr. Shanmugappa told The Hindu that he recently met Chief Minister Siddaramaiah and congratulated him for maintaining lower tax rates.