Karnataka - Bangalore

Cabinet to discuss fuel sales tax cut

Bangalore: The State Government will take a decision on reducing sales tax on petrol, diesel and LPG at Thursday’s Cabinet meeting, Home Minister V.S. Acharya has said.

He, however, refused to indicate whether the Government was contemplating slashing sales tax or entry tax. “The Cabinet will take a decision,” he told presspersons here on Tuesday.

Dr. Acharya said if it was decided to reduce sales tax on the commodities, the announcement would be made before Chief Minister B.S. Yeddyurappa presented the revised budget.

The State Government had sought compensation from the Centre for any reduction in sales tax on petro-products, he said.

Dr. Acharya, who attended the meeting of the Empowered Committee of State Finance Ministers on Value Added Tax in New Delhi on Monday on behalf of the Chief Minister, said the proposal would be discussed at the next meeting of the committee in Srinagar on June 21.

Dr. Acharya said the basic issue price of petro-products in the State was higher than in States such as Rajasthan. The issue price of petrol in Karnataka, which was Rs. 42.75 a litre, was only Rs. 41.25 in Kerala and Rs. 41.35 in some other States. The issue price of diesel in Karnataka was Rs. 1.50 more than in some other States. He said that other Finance Ministers had supported his demand for a uniform issue price.

Contrary to the common belief that the State Government benefited from the rise in prices of petrol and diesel, Dr. Acharya said it stood to lose around Rs. 500 crore, including the burden on the State road transport corporations (Rs. 170 crore), as the Government had decided not raise bus fares.

Apart from this, the Government was paying sales tax (Rs. 40 crore) on petro-products used by a fleet of 20,000 vehicles in various departments. The cascading effect of the fuel price hike on the general price index, such as increase in salaries of over 10 lakh government employees and higher expenditure on procurement of goods and services such as cement, sand, steel and transport should be considered while calculating the total loss to the State exchequer.

While, the income from sales tax to the State Government was around Rs. 380 crore, the losses would be around Rs. 500 crore, he said.

Unlike the Centre, State governments had limited resources, and they should be compensated for any relief they gave on sales tax on petro-products. This demand would be discussed by the Empowered Committee on June 21.

On aviation turbine fuel, the Minister said sales tax on it was 28 per cent in the State. It should be brought under the VAT regime and taxed at four per cent in all States, he said.

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