LUCKNOW: UP appears to be in a Catch 22 situation following the cut in fuel prices. While this brings the much-needed relief to the commoner, it comes as a wake up call for the government to compensate the loss of its tax revenue on account of the reduced fuel prices.
This is expected to adversely affect the government’s revenue mainly due to depletion of its taxes on petroleum product sizably. For the current financial year, the government has set a target of Rs 20,000 crore to collect through its internal taxes. Of it, Rs 7,000 crore are earmarked to be raised though taxes on petroleum products. But the government has now grown skeptical about its own estimate.
While painting a gloomy picture, a senior official puts it on terms of anonymity: “The target is unlikely to be met due to cut in fuel prices. We need to revisit our estimate and pull up our socks to mop up additional revenue to meet the target,” he added.
Under the revised rates, petrol is now sold at Rs 42.49 per litre as against that of Rs 47.64 per litre and diesel at Rs 32.12 per litre as against that of Rs 34.19 per litre. This is the second time when the fuel prices have been slashed in the last two months. This way petrol has become cheaper by Rs 8.34 and diesel by Rs 3.50 per litre.
However, the price cut has given cause of worry to the government. This is because the successive governments in the past had resorted to soft options of presenting a tax free budget. In fact this had become a fact of life in the state irrespective of its growing needs for development. The easiest way to fill the state’s coffer was the tax collected on petroleum products. This also holds true for the Mayawati government, which has also shown its reliance on the taxes collected on petroleum products.
However, the prevailing situation has witnessed a change and this has dawned with the reduction of fuel prices. This is in spite of the fact that UP has the highest tax slabs on petroleum products. This is 16% on diesel and 23% on petrol. Earlier it was 21% on diesel and 26% on petrol. However, the taxation was reduced to its present slabs by Mayawati when the prices of the petroleum products witnessed a galloping jump in June.
The bulk contribution of tax comes from the sale of diesel. Its average consumption ranges from 55 lakh kilolitre to 65 lakh kilolitre. On the other hand, the consumption of petrol stands between 11,000 kilolitre and 12,000 kilolitre. Since the prices of these products have gone down, the volume of tax collection on them is bound to go down correspondingly. And this is what causes concern to the government, which is already saddled with an additional burden of Rs 20,000 crore, including arrears due to the implementation of the Sixth Pay Commission for its nearly 16 lakh employees.
Source: http://timesofindia.indiatimes.com
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