BENGALURU: With
fuel prices touching record highs in Bengaluru on Wednesday, the question on the minds of Bengalureans is: Will the
Karnataka government provide some relief by reducing the state
sales tax component on petrol and diesel?
Well, the answer is NO. Speaking to The Times of India, chief minister
H D Kumaraswamy said: “The price of petrol and diesel in Karnataka is much cheaper compared to the prices of these fuels in BJP-ruled states. We are focused on generating and mopping up revenue required for our pro-people schemes such as the farm loan waiver. We are not in a position to reduce tax rates.”
Diesel touched an all-time high of Rs 71.99 per litre in Bengaluru on Wednesday, while petrol is being sold at Rs 80.73 per litre — close to the highest mark of Rs 82 recorded in 2012.
Kumaraswamy had raised sales tax on petrol and diesel by two per cent in the state budget which he presented in July, and now with the price of fuel on the boil, the general expectation was that the government would reduce its share of tax.
However, Kumaraswamy spiked that notion, saying: “But I promise that there will be no further tax hikes.”
In fact, sky-rocketing prices of fuel have revived the debate of bringing petrol and diesel under the purview of Goods and Services Tax (GST). Trade bodies and petroleum dealers are urging the Centre and states to reduce taxes.
“A t a time when prices of crude oil seems to be coming down, prices of petrol and diesel in India are going up because of the rupee’s fall against the US dollar,” said M Prabhakar Reddy, chairman of All-India Petroleum Dealers Association. “It calls for drastic reform in the way fuel is priced in India. The most important step would be to include motor fuel under the purview of GST.”
Petrol and diesel would be much cheaper if they are included under GST. At present, the basic price of a litre of petrol and diesel is Rs 39.15 and Rs 42.33 respectively. If they are taxed at 18% under GST, then the cost would be Rs 46.19 and Rs 49.89 per litre respectively, apart from dealer commission of about Rs 2.
Even
oil companies are in favour of including motor fuels under GST.
“Everyone knows that the best possible solution to control prices of petrol and diesel is to bring them under the ambit of GST,” said G V Krishna, independent director, Hindustan Petroleum Corporation Limited (HPCL). “It is being delayed for various reasons, but it is high time the central government thinks seriously about this reform.”
B T Manohar, taxation committee chairman, Federation of Karnataka Chambers of Commerce and Industries (FKCCI), said, “The high price of fuel will have a cascading effect on the prices of other commodities.”
However, the prospect of motor fuels being included under GST looks grim.
Several states including Karnataka are refusing to endorse the move as it would deal a huge blow to their revenue collection. For instance, the Karnataka government earns an annual revenue of Rs10,800 crore through fuel sales and it is expected to suffer a loss of at least Rs 2,000 crore per year if petrol and diesel are included under GST.
“States are suffering a dip in revenue after GST was launched last year and the shortfall will continue till the new tax regime stabilises,” an official in the finance department said. “Including petrol and diesel under GST will only increase losses so we don’t want it for now.”
Oil companies are in favour of including motor fuels under GST.
